The Securities and Exchange Commission’s most powerful monetary remedy is disgorgement—the equitable mechanism that strips defendants of their ill-gotten gains regardless of whether any victim can be identified or any dollar of loss can be traced.
In theory, disgorgement simply puts a wrongdoer back where they started. In practice, it operates as something closer to a penalty: A court orders the defendant to pay the full amount of profits derived from the violation, and those funds go into a Fair Fund for eventual distribution to harmed investors—if any can be found.
The US Supreme Court is about to consider whether that “if any” qualifier matters. In Sripetch v. SEC, scheduled for argument on April 20, the Supreme Court could resolve a circuit split on a question that goes to the foundation of the SEC’s remedial authority: Must the SEC show that its enforcement target’s conduct caused pecuniary harm to investors before a court can award disgorgement?
The stakes are real. In fiscal year 2024, the SEC secured more than $6 billion in disgorgement and related prejudgment interest—nearly three-quarters of the SEC’s total financial remedies. The answer in Sripetch will reshape settlement negotiations, litigation strategy, and the SEC’s institutional incentives in every enforcement action where disgorgement is on the table.
Source: The Supreme Court Could Defang the SEC’s Most Powerful Remedy