by Robert J. Giuffra, Judson Littleton, and Elizabeth Olsen

Summary

On November 1, the U.S. Supreme Court granted certiorari in Liu v. SEC, No. 18-1501. This appeal, which likely will be decided in the spring or early summer of 2020, presents the question of whether the SEC may obtain disgorgement as a component of “equitable relief” in a civil action to enforce securities law violations. The SEC has often sought disgorgement in civil enforcement actions as a method of augmenting (sometimes doubling) the amount of money that the SEC could otherwise obtain, thus increasing recoveries or settlement amounts. Although courts have long allowed the SEC to obtain disgorgement, some courts have suggested that the Supreme Court’s 2017 decision in Kokesh v. SEC[1] holding that disgorgement is a penalty for statute of limitations purposes effectively abrogated the SEC’s authority to be awarded “equitable” disgorgement. If the Supreme Court holds that the SEC may continue to obtain disgorgement, the decision will likely maintain the status quo in SEC enforcement actions. But a decision by the Supreme Court holding that the SEC cannot obtain disgorgement would have a significant impact on the amount of money the SEC can recover in future civil enforcement actions. Continue reading →