SCOTUS: SEC Disgorgement Does Not Require Investor Loss
A unanimous Supreme Court held the SEC may recover a defendant's wrongful gains regardless of investor financial loss, but a concurrence questions whether disgorgement now triggers a right to a jury trial.
In Sripetch v. SEC, the U.S. Supreme Court unanimously held that the Securities and Exchange Commission may obtain disgorgement of a defendant's ill-gotten gains without proving that investors suffered a corresponding financial loss. Writing for the Court, Justice Gorsuch grounded the decision in traditional equitable principles, explaining that disgorgement is measured by the wrongdoer's gain, not the victim's loss. The ruling resolves a circuit split in the SEC's favor, preserving a powerful enforcement tool used to recover billions annually and foreclosing a key defense in cases like market manipulation or pump-and-dump schemes where proving investor harm is difficult.
While the core holding strengthens the SEC's hand, a concurrence from Justice Thomas forcefully argued that congressional amendments and agency practice may have converted disgorgement into a legal remedy, not an equitable one. This would trigger the Seventh Amendment right to a jury trial, a development that could fundamentally alter the landscape of SEC enforcement. A circuit split on that question already exists, making it the next major battleground for securities litigators to watch and a critical argument for defendants to preserve.