In the end, although the oral argument will be telling, the Supreme Court seems unlikely to conclude that the SEC can continue to obtain disgorgement, in its current form, when the SEC sues a defendant in court. It is theoretically possible that the Court could cut the disgorgement remedy back without eliminating it entirely—for instance, by allowing the SEC to collect only amounts that a defendant personally received and kept from his fraud. But given the Supreme Court’s recent track record, the most likely outcome is that the SEC will be entirely disempowered from asking a court to award disgorgement.
If that is how the case turns out, the loss of that disgorgement remedy does not mean that the SEC will be left powerless. The SEC’s statutory power to seek civil penalties in court can take up the slack in many of its cases. The SEC has express statutory authorization to seek disgorgement in the agency’s administrative forum. And Congress could decide to enact a new statute expressly granting the SEC a disgorgement remedy if Liu does not go the SEC’s way.
‘Enforcement 40’ for 2020
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