A case now before the US Supreme Court could affect how much authority the Securities and Exchange Commission (SEC) has to use disgorgement, which is one of its main enforcement tools. In Sripetch v. SEC, the Court will decide if the agency should face stricter limits when trying to recover illegal profits, especially when it is hard to identify direct victims.  

According to Bloomberg, disgorgement plays a key role in the SEC’s enforcement efforts. It lets the agency take back money earned through wrongdoing and, ideally, give it back to investors who were harmed. In fiscal 2024, the SEC ordered more than $6 billion in disgorgement, and almost $11 billion the year before, showing how much the agency relies on this tool. In court filings, the SEC says disgorgement “reflects the fundamental principle that it would be quintessentially inequitable to permit a known wrongdoer to profit from his own misdeed.” 

Some critics say disgorgement no longer serves its original purpose. They point out that when victims cannot be found, the money collected is sometimes not returned to anyone or ends up in the Treasury. This has raised questions about whether the process is fair. The SEC’s own records show that billions in disgorgement and penalties have not reached victims.  

In recent years, the Supreme Court has already reduced the SEC’s authority, for example, by limiting disgorgement to net profits and requiring that awards be “awarded for victims.” The current case may clarify whether it is necessary to show measurable financial harm for these awards.  

A decision is expected by July, and the result could change how the SEC enforces its rules, affecting both small and large cases.