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November 20, 2019

Supreme Court Case Threatens One of the SEC’s Most Powerful Weapons to Fight Fraud

Making crooks and lawbreakers give up their ill-gotten gains is critical to making sure “crime does not pay,” which is key to deterring future crimes.  After all, if you get to keep what you illegally took, that wasn’t yours, then you are incentivized to do it again.

This is called “disgorgement” and should always be required along with additional fines, penalties or other sanctions.  Unfortunately, the Supreme Court, in a very bad 2017 decision, ruled that the SEC can only obtain disgorgement from crooks going back five years. 

Now the crooks are back before the Court asking for it to rule that the SEC cannot obtain disgorgement at all!  The defendants in this new case insist that the SEC has no statutory authority to seek any amount of disgorgement since, although the law allows the SEC to ask a court for “equitable relief,” disgorgement, they claim, must be viewed exclusively as a punitive measure, not “equitable relief,” which is what the court said in the earlier case.  This would overturn 50 years of court rulings that disgorgement is an appropriate equitable remedy in SEC enforcement actions and allow countless fraudsters to retain vast amounts of money they have taken from their investor victims. 

This case once again illustrates the enormous impact that Supreme Court cases involving financial regulation can have on the lives of all Americans, as we detailed in our recent report on how the Supreme Court impacts the economic security and prosperity of the American people. Briefing on the merits will soon get underway, and Better Markets plans to support the SEC with an amicus brief highlighting the damage that would be done by a decision stripping the SEC of its long-standing authority to seek court-ordered disgorgement to recover funds stolen from investors.



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