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June 24, 2020

Supreme Court Ruling in Liu v. SEC a Victory for Agency, Investors

The Supreme Court issued a ruling this week upholding the SEC’s right to obtain disgorgement from those who violate the securities laws and defraud investors. This is a major win for the SEC and investors everywhere, says Steve Hall, legal director and securities specialist.

“The ability to recover money stolen by scam artists has long been one of the SEC’s most powerful enforcement tools, and today’s decision means that it will continue to play that essential role, Hall says. “ The Court held that disgorgement is equitable relief permitted under the securities laws, provided it does not exceed a wrongdoer’s net profits and is awarded for victims.  The con artists of the world won’t like it, but it’s a huge win for everyone else.” 

Hall notes that the status of disgorgement was in jeopardy after two fraudsters appealed a disgorgement order against them that the SEC had won in federal court. Relying on a prior Supreme Court decision from 2017, they claimed that the remedy was really an unlawful penalty, not an equitable measure designed to prevent wrongdoers from keeping their ill-gotten gains.

“The Court flatly rejected that claim, citing decades of court decisions showing that disgorgement has “typically been available in equity.”

Better Markets filed a joint amicus or “friend of the court” brief with the Center for Responsible Lending and the National Consumer Law Center defending the SEC’s position.



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