On June 5, Megan Barbero spoke with Law360 about the U.S. Supreme Court's decision in SEC v. Sripetch. The following is an excerpt:
The U.S. Securities and Exchange Commission's victory before the U.S. Supreme Court Thursday is likely to give the agency a leg up in settlement negotiations, but attorneys say that some defendants will continue to press judges to review the agency's disgorgement requests based on questions that the high court still hasn't answered.
The justices ruled in the SEC's favor and against Ongkaruck Sripetch, who argued that the agency needed to prove that the victims of his pump-and-dump scheme were financially harmed before they could collect $3.3 million in disgorgement from him.
Megan Barbero of Venable LLP said she doesn't think the court will take up the question of jury rights in short order, but it's one that may continue percolating up through the lower courts.
"It may be that there are defendants who will start making and preserving that argument in light of Justice Thomas's concurring opinion," she said.
Even with these open questions remaining, attorneys say the SEC is likely to make the most out of Thursday's decision.
The question of whether it has to demonstrate pecuniary harm has taxed the agency's disgorgement efforts ever since Liu came down, according to former SEC general counsel Barbero.
She said disgorgement requests became even trickier for the agency to navigate after the Second Circuit ruled in 2023, based on Liu, that the SEC did need to show pecuniary harm before it could demand alleged wrongdoers turn over their profits.
"In many of these fraud schemes, it's difficult or sometimes impossible to have come up with the evidence to demonstrate to the court the financial losses to victims," Barbero said.
For example, in a pump-and-dump scheme like the one Sripetch participated in, it's "a much heavier lift" for the agency to track down everyone who purchased inflated stock and to determine when they purchased it and at what price than it is to figure out much money a defendant made selling the inflated securities, Barbero explained.
"By answering a significant unanswered question from Liu in the SEC's favor, the opinion is certainly another thumb on the scale for the agency," she said. "It may well make it more likely that defendants are willing to negotiate settlements with the agency."
There may even be defendants who were holding off on a settlement until the Supreme Court decided the issue who are now more inclined to strike a deal with the SEC, she said.
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