Supreme Court limits power of SEC to recoup illegal gains

Supreme Court limits power of SEC to recoup illegal gains
The ruling came in a lawsuit brought by a California couple ordered to pay $27 million after being found to have defrauded investors
JUN 22, 2020
By  Bloomberg

The Supreme Court limited the power of the Securities and Exchange Commission to recoup illegal profits from wrongdoers, putting new curbs on one of the agency’s most potent legal weapons.

The 8-1 ruling Monday is a partial victory for a California couple ordered to pay $27 million after being found to have defrauded investors.

The justices said the SEC can win “disgorgement” in federal court if the money can be used to reimburse defrauded investors and is capped at the wrongdoer’s net profits. But the court also suggested that awards can’t go further, putting a new constraint on the agency’s enforcement efforts.

Disgorgement is a traditional tool used by judges to return wrongful gains to the victims. It’s distinct from SEC fines, which the SEC can also seek and which can be used as punishment.

The SEC typically wins more than $1 billion a year in disgorgement orders in federal court. The ruling didn’t directly affect the SEC’s separate authority to seek disgorgement through administrative proceedings.

Justice Sonia Sotomayor wrote the court’s majority opinion. Justice Clarence Thomas dissented, saying he would have gone further and barred the SEC from seeking disgorgement at all in federal court.

Latest News

LPL building out alts, banking services to chase wirehouse advisors, new CEO says
LPL building out alts, banking services to chase wirehouse advisors, new CEO says

New chief executive Rich Steinmeier replaced Dan Arnold on October 1.

Franklin Templeton CEO vows to "do what's right" amid record outflows
Franklin Templeton CEO vows to "do what's right" amid record outflows

The global firm is navigating a crisis of confidence as an SEC and DOJ probe into its Western Asset Management business sparked a historic $37B exodus.

For asset managers, easy experience is key to winning advisors' businesses
For asset managers, easy experience is key to winning advisors' businesses

Beyond returns, asset managers have to elevate their relationship with digital applications and a multichannel strategy, says JD Power.

Why retaining HNW clients ultimately comes down to one basic thing
Why retaining HNW clients ultimately comes down to one basic thing

New survey finds varied levels of loyalty to advisors by generation.

Stocks drop as investors digest Microsoft, Meta earnings
Stocks drop as investors digest Microsoft, Meta earnings

Busy day for results, key data give markets concerns.

SPONSORED Out with the old and in with the new: a 50% private markets portfolio

A great man died recently, but this did not make headlines. In fact, it barely even made the news. Maybe it’s because many have already mourned the departure of his greatest legacy: the 60/40 portfolio.

SPONSORED Destiny Wealth Partners: RIA Team of the Year shares keys to success

Discover the award-winning strategies behind Destiny Wealth Partners' client-centric approach.