Yesterday, in Liu v. SEC, No. 18-1501 (June 22, 2020), the Supreme Court held that the Securities and Exchange Commission (SEC), in federal court enforcement actions, may continue to seek, and courts may continue to award, disgorgement as “equitable relief” under Section 21(d)(5) of the Securities Exchange Act of 1934.This was a question the Court had expressly declined to reach in its 2017 decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017). Although the Liu Court ruled in favor of the SEC, the 8-1 decision effectively limited the scope of this remedy, holding that “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible” under the statute. The decision raises numerous questions going forward for when, and how, tribunals will impose disgorgement in SEC enforcement actions.
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