SCOTUS Limits SEC's Ability to Seek Disgorgement of Illegal Profits

Chris Gaetano
Published Date:
Jun 6, 2017

The Supreme Court of the United States, in a unanimous ruling, limited the power of the Security and Exchange Commission to seek disgorgement of profits gained through illegal activity, according to the Washington Post. The case concerned a man named Charles R. Kokesh, who was convicted of misappropriating money from four investment companies he controlled from 1995 through 2009 and using the proceeds for a lavish lifestyle. In 2015 he was ordered to pay $35 million, the calculated amount of illegal profits dating back to when he first began misappropriating funds, on top of a $2.4 million legal penalty. But Kokesh argued that he should only have to pay $5 million disgorgement, as penalties are restricted to a five-year statute of limitations. The SEC argued that the statute of limitations doesn't apply because disgorgement isn't technically a penalty but, rather, something that restores the offender to a situation where he would have been had he not acted illegally. The court, however, didn't buy this argument, with Justice Sonia Sotomayor saying that the SEC disgorgement bears all the hallmarks of a legal penalty. Regardless of what the SEC may think, disgorgement orders count as penalties, and therefore may not seek more than five years worth of disgorgement, according to the court. 

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