US Supreme Court Rules SEC Can Seek Disgorgement of Ill-Gotten Gains Without Proving Investor Pecuniary Loss, Resolving Circuit Split
The US Supreme Court has ruled that the SEC (Securities and Exchange Commission) can seek disgorgement (the repayment of profits made through wrongdoing) as an equitable remedy without first demonstrating that investors suffered a measurable pecuniary loss. The decision preserves the Court's earlier holding in *Liu* that disgorgement is subject to traditional equitable principles and must be awarded 'for victims' — but clarifies that those equitable principles do not require a showing of pecuniary loss before a person qualifies as a 'victim' entitled to an award of a wrongdoer's profits. The ruling resolves a longstanding split between the US circuit courts of appeal: the Ninth and First Circuits had not required a showing of pecuniary loss for the SEC to seek disgorgement, while the Second Circuit had imposed that additional burden. The case involved a defendant named Sripetch, who argued that the SEC needed to demonstrate investor pecuniary loss as a precondition. The Court rejected that argument, focusing instead on whether the defendant's conduct constituted actionable interference with legally protected interests. For UK practitioners, the ruling is significant context for comparative securities enforcement: the FCA (Financial Conduct Authority) operates its own disgorgement regime under UK financial regulation, and the doctrinal debate about whether enforcement agencies must prove investor loss to recover wrongful profits is not unique to the US.
Why this matters
This ruling strengthens the SEC's enforcement arsenal by removing a procedural hurdle that the Second Circuit had imposed — defendants can no longer argue that enforcement action fails because no quantifiable investor loss can be demonstrated. For UK comparative purposes, the decision is instructive because the FCA's own disgorgement powers operate under a different statutory framework, but the underlying policy question — how broadly should regulators be able to recover ill-gotten gains? — is directly relevant to UK regulatory enforcement practice. The decision is also likely to influence how securities fraud defendants in the US structure settlement negotiations, since disgorgement exposure is now broader. US-facing City firms advising on cross-border securities enforcement will need to factor this development into their clients' risk assessments.
On the Ground
A trainee on a regulatory team would assist in preparing a compliance gap analysis memo comparing SEC and FCA disgorgement powers, and would draft a regulatory notification summary of the ruling's implications for UK-regulated entities with US securities market exposure.
Interview prep
Soundbite
Removing the pecuniary-loss hurdle expands SEC disgorgement reach — and sets a benchmark that UK enforcement practitioners will watch closely.
Question you might get
“How does the SEC's disgorgement power compare to the FCA's powers to recover ill-gotten gains in UK enforcement proceedings, and what are the key differences in how each regime defines 'victim'?”
Full answer
The US Supreme Court has held that the SEC can pursue disgorgement of a wrongdoer's profits without proving that investors suffered a quantifiable financial loss, resolving a three-way split among the federal appellate courts. The ruling preserves the requirement that disgorgement be awarded 'for victims' under traditional equitable principles, but holds that victimhood does not depend on demonstrable pecuniary harm. For UK securities lawyers, this matters because the FCA operates an analogous disgorgement regime, and the doctrinal tension between 'victim harm' and 'wrongdoer profit' as the basis for disgorgement is a live question in UK enforcement practice too. The practical effect in the US is that settlement leverage in SEC enforcement actions increases, since defendants lose a significant procedural defence.
My notes
saved