On June 4, 2026, in a unanimous opinion, the U.S. Supreme Court ruled that the U.S. Securities and Exchange Commission (“SEC”) could continue to seek to disgorge any ill-gotten gains from defendants in enforcement actions, even absent a showing that a given defendant caused victims to suffer pecuniary harm.
Sripetch v. SEC, No. 25-466. The decision settles a circuit split that followed the Court’s 2020 decision in
Liu v. SEC, with the First and Ninth Circuits previously holding that the SEC could obtain disgorgement without proving investors have suffered financial loss and the Second Circuit taking the opposite view.
The SEC’s disgorgement power was historically not established by statute. Instead, it first emerged as an equitable principle applied by courts, leading to some uncertainty as to its limits in SEC actions. In 2020, in the context of considering whether the SEC could validly seek disgorgement and, if so, what statute of limitations should apply, the Supreme Court in
Liu observed that disgorgement could be a proper equitable remedy but that, at least in that case, the SEC had used it as a penalty triggering a five-year statute of limitations. Following
Liu, Congress passed a statute affirmatively granting the SEC the right to seek disgorgement, 15 U.S.C. § 78u(d)(7), but not specifically defining when and how it could be used.
In
Sripetch, the parties advanced various arguments regarding whether the new statute might allow the SEC to seek disgorgement beyond traditional equitable principles, but ultimately the Court did not deem it necessary to decide such questions. The Court observed that “[t]he only question we took this case to resolve is whether the SEC must show that an investor suffered a pecuniary loss before it may secure a disgorgement remedy under either §78u(d)(5) [the statute that allows the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors”] or §78u(d)(7) [the statute that expressly al¬lows the Commission to seek disgorgement in enforcement proceedings].” And to answer that question, the Court observed, “we can simply assume without deciding that disgorgement under §78u(d)(7) remains an equitable remedy—so that it must comply with traditional equitable rules, including the rule that disgorgement must be awarded for victims.” The Court held that the equitable principle of disgorgement is intended to deprive the defendant of his unlawful gains when “a victim has suffered an interference with protected interests” due to the defendant’s scheme. Because “interference with protected interests” is not limited to “financial loss” on the part of the victim, held the Court, a “showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.”
In terms of practical implications, the Court’s decision will likely be somewhat limited, given that in most cases involving fraud and disgorgement the SEC is able to show at least
some financial losses to victims. Nevertheless, it is a boost to the SEC’s enforcement program overall.
