Supreme Court Backs SEC on Disgorgement Without Investor Loss

In Sripetch v. SEC, the U.S. Supreme Court unanimously held that the Securities and Exchange Commission may obtain disgorgement of a wrongdoer's profits without proving that investors suffered any corresponding financial loss. The opinion by Justice Gorsuch, grounded in traditional equitable principles, reasoned that disgorgement is a gain-based remedy measured by the defendant's unjust enrichment, not a loss-based remedy designed to compensate victims. The ruling resolves a circuit split in the agency's favor and significantly strengthens its enforcement powers, particularly in cases like market manipulation or unregistered offerings where proving direct investor loss is difficult. While the decision solidifies a key SEC remedy, a concurrence from Justice Thomas forcefully argued that congressional amendments may have converted disgorgement into a legal remedy. This would trigger the Seventh Amendment right to a jury trial in SEC enforcement actions seeking the remedy, a question that is already the subject of a circuit split and is likely to return to the Court. Counsel for defendants in SEC actions should continue to contest disgorgement amounts and preserve arguments for a jury trial.