Questions about the scope of the SEC’s disgorgement authority remain open, including in administrative proceedings.

Key Points:

..Since the April 2017 decision in Kokesh v. SEC, the statutory authority of the Securities and Exchange Commission (SEC or Commission) to seek disgorgement in civil enforcement proceedings has been an open question.

..On June 22, 2020, in Liu v. SEC, the Supreme Court upheld the SEC’s statutory authority to pursue disgorgement as “equitable relief” in federal court under 15 U.S.C. § 78u(d)(5). The Court held that disgorgement is an equitable remedy where it is restricted to an individual wrongdoer’s net profits and is awarded to victims. However, in remanding the case to the lower courts to craft a more limited disgorgement order, the decision left open key questions regarding the scope and contours of the SEC’s disgorgement authority.

..Liu also left unresolved whether the Court’s restrictions on disgorgement will apply to SEC administrative proceedings or other federal agencies.