On January 1, 2021, Congress overrode the presidential veto of the National Defense Authorization Act for Fiscal Year 2021 (NDAA). While the new law dealt mostly with national security, it also included a provision that substantially amended the SEC’s remedial powers, expressly authorizing the SEC to obtain disgorgement in federal court and doubling the statute of limitations for some types of relief. Early reactions to the amendments have viewed them as attempting to overturn the Supreme Court’s recent decisions in Kokesh v. SEC and Liu v. SEC that had curtailed the SEC’s remedial powers. Kokesh overruled a long line of lower court cases that had held that disgorgement was not subject to any statute of limitations. And Liu rejected the SEC’s broad interpretation of disgorgement, instead adopting a much narrower view of disgorgement, closer to how other courts had interpreted the sanction under common law, such as by permitting deductions for certain legitimate business expenses. Against this backdrop, some have suggested the amendments “neuter” or “upend” Liu’s limitations on disgorgement.
Business Law Today
SEC Disgorgement Authority May Be Limited Event After Recent Amendments to the Exchange Act
January 27, 2021