Sripetch v. SEC marks the third installment in an almost decade-long debate over the boundaries of SEC disgorgement, a significant agency enforcement tool. In FY 2025, for instance, the Commission obtained $10.8 billion in disgorgement orders compared with $7.2 billion in civil penalties. The Supreme Court previously limited the agency's disgorgement authority by applying both a five-year statute of limitations, Kokesh v. SEC, 581 U. S. 455 (2017), and traditional equitable principles, including that a defendant's net profits be returned to victims where feasible, Liu v. SEC, 591 U.S. 71 (2020). But the Court rejected Sripetch's invitation to apply another limit to the SEC's disgorgement authority and instead held that the agency is not required to prove pecuniary loss.
The agency began using disgorgement in the 1970s, despite lacking explicit statutory authorization, by persuading lower courts to grant the remedy as an exercise of their equitable powers. In 2002, Congress enacted 15 U.S.C. § 78u(d)(5), which allowed the SEC to pursue "any equitable relief that may be appropriate or necessary for the benefit of investors." This became the basis for the SEC to seek disgorgement. However, as Kokesh recognized, the agency wielded the remedy as a penalty, prompting the Court to rein in SEC disgorgement authority by applying the same statute of limitations that applies to penalties. Three years later, Liu affirmed that "equitable relief" under Section 78u(d)(5) can include disgorgement. However, traditional equitable principles and the phrase "for the benefit of investors" imposed two limits on its use: (1) remedies are limited to defendant's net profits, and (2) the award must go to victims where feasible.
Six months after Liu, Congress amended the statute, adding Sections 78u(d)(7) and 78u(d)(3)(A)(ii). Section 78u(d)(3)(A)(ii) provides the SEC with authority to "require disgorgement under paragraph (7) of any unjust enrichment" received "as a result of such violation." Section 78u(d)(7), in turn, authorizes the SEC to seek disgorgement "under any provision" of the securities laws. Unlike Section 78u(d)(5), Section 78u(d)(7) does not contain language requiring relief to be "for the benefit of investors," resulting in differing opinions about how Liu's requirements apply after the statutory amendments. The Second Circuit held that the disgorgement remedy under both Sections 78u(d)(5) and (d)(7) is equitable and available only if it can be awarded to victims, which the court defined as those who have suffered "pecuniary harm." In contrast, the First Circuit held that because disgorgement's purpose is to deprive wrongdoers of ill-gotten gains, a pecuniary harm showing is not required.
In this case, the SEC charged Ongkaruck Sripetch with six counts of securities fraud and one count of selling unregistered securities. Sripetch initially consented to an entry of judgment against him and agreed to disgorgement until the SEC sought over $4.1 million in unjust profits. Sripetch protested that Section 78u(d)(7) incorporates Liu and traditional equitable principles. He argued that the Ninth Circuit should follow the Second Circuit's lead and hold that the SEC must show investor loss before disgorgement is available. The Ninth Circuit disagreed, holding that a pecuniary harm showing was not required under the statute and would be too constrictive a reading of "victim." That decision deepened the existing circuit split. The Supreme Court granted certiorari to answer the question of what the SEC must show to seek disgorgement under either Section 78u(d)(5) or Section 78u(d)(7).
In a unanimous opinion by Justice Gorsuch, the Supreme Court held that the SEC does not need to show financial harm to investors. The Court explained that disgorgement is an equitable remedy measured by the defendant's ill-gotten gains, not the victim's loss. It is intended to strip the defendant of those gains, rather than compensate the victim. While the agency must show that the defendant interfered with the plaintiff's legally protected interests, it need not establish that the interference caused pecuniary loss. The Court's decision in Sripetch further distinguishes SEC enforcement actions from private securities-fraud suits, which do require a preliminary showing of the plaintiff's economic loss. See 15 U.S.C. § 78u-4(b)(4).
But Justice Gorsuch's opinion leaves open several questions about the agency's disgorgement authority:
- Can the SEC seek disgorgement when it is not feasible to distribute funds to harmed investors? And what is sufficient to show "infeasibility"?
- Section 78u(d)(7) lacks Section 78u(d)(5)'s language tying the remedy to the "benefit of investors." Does this permit the SEC to diverge from traditional equitable principles?
- If Section 78u(d)(7) allows departure from traditional equitable principles and disgorgement's potential use as a penalty, does this trigger the Seventh Amendment right to a jury trial?
Justice Thomas's concurrence picks up on this last point to argue that disgorgement has become a legal remedy that requires a jury trial. Justice Thomas further suggests that the circuits are already split, so that the Court will answer this question soon.
In rejecting a pecuniary loss requirement, Sripetch shores up a powerful tool in the SEC's arsenal, particularly for charges where identifying victims and quantifying loss are difficult. But whether this is the last disgorgement case the Supreme Court hears in the near future depends on how the SEC deploys its disgorgement authority and on how future litigants pursue the questions Sripetch left unanswered.
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The authors thank Julia T. Weil, a summer associate in our Washington, DC office, for her assistance in writing this article.