CERTainly Getting Interesting: Supreme Court Again To Address SEC's Power To Obtain Disgorgement

• Published date: 19 January 2026
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation, Securities
• Law Firm: Holland & Knight
• Author: Jessica B. Magee, Allison Kernisky and Brandon Len King

The U.S. Supreme Court on January 9, 2025, granted certiorari in Ongkaruck Sripetch v. U.S. Securities and Exchange Commission, a case from the U.S. Court of Appeals for the Ninth Circuit that tees up a circuit split on the question whether, to obtain disgorgement, the SEC must establish that investors suffered actual financial (pecuniary) harm. SEC v. Sripetch, 154 F.4th 980 (9th Cir. 2025), cert. granted sub nom. Sripetch v. SEC, No. 25-466, 2026 WL 73091 (U.S. Jan. 9, 2026). The forthcoming decision will be the third in a series of key Supreme Court decisions since 2017 reshaping the agency's disgorgement power. The potential ramifications of this decision could have a serious impact on whether and how the SEC seeks disgorgement in future cases.

SEC Disgorgement in a Nutshell

Disgorgement is a financial remedy through which the SEC requires defendants who profited from securities violations to return their "ill-gotten gains" rather than retain the financial fruits of their alleged wrongdoing. The ability to secure disgorgement has long served as a powerful tool in the SEC's efforts to enforce federal securities laws. Disgorgement is often, but not always, awarded or agreed to in a settlement along with assessment of a civil penalty, a separate financial remedy long seen as serving a different, purely punitive purpose.

Until fairly recently, courts have broadly awarded disgorgement across the spectrum of securities violations - from cases alleging intentional fraud to cases alleging pure strict liability violations (e.g., failure to register) and, hence, in cases where investors suffered financial harm (e.g., Ponzi scheme cases, offering frauds, etc.) and other cases in which such harm was not alleged or could not be established (e.g., insider trading cases).

Prior Supreme Court Decisions on Disgorgement and the Legislative Response

The SEC's power to obtain disgorgement from alleged securities law violators has been the subject of numerous district court and appellate cases and legislation. Two cases - Kokesh v. SEC and Liu v. SEC - are worth bearing in mind when considering the Supreme Court's recent decision to once again consider the extent of the SEC's power to strip alleged wrongdoers of their financial gains.

Disgorgement Found to Function as a Penalty

In 2017, the Supreme Court in Kokesh overturned the U.S. Court of Appeals for the Tenth Circuit's decision affirming a district court order that the defendant pay more than $34 million in disgorgement representing the ill-gotten gains "causally connected" to the violations. Kokesh v. SEC, 581 U.S. 455 (2017).

Siding with the defendant, in an opinion authored by Justice Sonia Sotomayor, the Supreme Court unanimously concluded that disgorgement in fact does function as a penalty insofar as it is intended to serve as a deterrent for wrongs to the public rather than a purely remedial purpose in compensating a harmed plaintiff. In the Court's words, "SEC disgorgement thus bears all the hallmarks of a penalty: It is imposed as a consequence of violating a public law and it is intended to deter, not to compensate." Id. at 465. Accordingly, the Court concluded that SEC disgorgement claims are subject to a five-year statute of limitations.

In 2021, in response to Kokesh and the Supreme Court's later decision on disgorgement in Liu v. SEC (discussed below), the SEC's disgorgement power was codified through the National Defense Authorization Act (NDAA) and amendments to applicable securities laws under which the SEC can obtain...