Supreme Court Declines to Limit SEC’s Disgorgement Authority

Summary

On June 4, 2026, the Supreme Court in Sripetch v. SEC[1] unanimously held that the Securities and Exchange Commission may continue to seek disgorgement without showing that investors suffered pecuniary loss. In the district court, Ongkaruck Sripetch consented to the entry of a civil judgment for executing fraudulent penny stock schemes. But when the court ordered disgorgement in excess of $2 million, Sripetch appealed. The Supreme Court affirmed the Ninth Circuit’s decision that the SEC could obtain disgorgement without demonstrating that investors suffered pecuniary harm from Sripetch’s penny stock fraud schemes. The unanimous decision preserves a significant SEC enforcement tool while declining to extend a recent line of cases limiting the SEC’s disgorgement authority.

Background

Disgorgement

The SEC’s disgorgement authority has developed in stages. As the Court explained, beginning in the 1970s, courts ordered disgorgement in SEC cases as an exercise of their equitable authority ancillary to injunctions.[2] In Kokesh v. SEC, the Supreme Court held that SEC disgorgement, as then practiced, operated as a “penalty” for purposes of the five-year statute of limitations in 28 U.S.C. § 2462, while expressly declining to decide whether courts had authority to order disgorgement in SEC enforcement actions at all.[3] Three years later, in Liu v. SEC, the Court held that Section 21(d)(5) of the Exchange Act, which authorizes “equitable relief,” permits disgorgement only if the remedy complies with traditional equitable limits, including that the award generally be limited to net profits and awarded for victims.[4]  

Following Liu, Congress responded by adding statutory provisions expressly authorizing the SEC to seek, and federal courts to grant, disgorgement.[5] First, Section 21(d)(3)(A)(ii) provides that, in an action brought by the SEC, a federal district court may “require disgorgement under paragraph (7) of any unjust enrichment by the person who received such unjust enrichment as a result of such violation.” 15 U.S.C. § 78u(d)(3)(A)(ii). Second, paragraph (7) provides that the SEC “may seek, and any Federal court may order, disgorgement.”  Id. § 78u(d)(7).

The Underlying Case

Here, the SEC alleged that Sripetch and his associates obtained proceeds exceeding $6.6 million through fraudulent penny stock schemes. Sripetch agreed to a consent judgment that included unspecified disgorgement of his ill-gotten gains. The district court ordered disgorgement of over $2 million.[6] Sripetch appealed, arguing that the disgorgement award was unsupported because the SEC did not show that the investor-victims of his schemes suffered pecuniary harm.[7] The Ninth Circuit affirmed, holding that the SEC was not required to show pecuniary harm to obtain a disgorgement award under Section 21(d)(5) or (d)(7).[8] In so ruling, the Ninth Circuit joined the First Circuit,[9] but deepened an existing split with the Second Circuit, which had previously ruled that, consistent with Liu and because equitable relief is “awarded for victims,” a showing of pecuniary harm is required.[10] The Supreme Court granted certiorari.

The Supreme Court’s Decision

In a unanimous opinion authored by Justice Gorsuch, the Supreme Court held that the SEC may obtain disgorgement without showing pecuniary harm. As Justice Gorsuch explained, “a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.”[11] Therefore, consistent with “the traditional equitable rule that disgorgement must be ‘awarded for victims,’” the SEC may obtain disgorgement even in the absence of investor loss.[12]

In reaching that result, the Court did not resolve the full scope of the SEC’s disgorgement authority following the enactment of Section 21(d)(7). Instead, the Court assumed without deciding that the Section 21(d)(7) disgorgement remedy is equitable in nature and therefore “must comply with traditional equitable rules, including the rule that disgorgement must be awarded for victims.”[13]

Nevertheless, the Court went on to determine that an investor may qualify as a victim even in the absence of pecuniary harm under traditional equity principles. The Court distinguished legal and equitable remedies, observing that in equity, “the final award to the plaintiff is not measured by his loss but by the defendant’s gain attributable to his wrongdoing against the plaintiff.”[14] In other words, under “traditional equitable principles,” a court may “order[] the defendant to disgorge the value of the gain attributable to his invasion of the plaintiff’s legally protected interests without requiring a showing of pecuniary loss.”[15] 

Justice Thomas concurred and wrote separately. He agreed that the SEC need not show pecuniary harm, but rejected the Court’s assumption that SEC disgorgement is an equitable remedy.[16] In his view, SEC disgorgement authority under the Exchange Act is a legal remedy that triggers the right to a jury trial.[17]  

Implications

First, disgorgement remains a key enforcement tool for the SEC. In fiscal year 2025, the agency obtained orders for monetary relief comprising of $10.8 billion in disgorgement and prejudgment interest and $7.2 billion in civil penalties.[18] The SEC returned only approximately $262 million to harmed investors in that period.[19] Although the SEC under Chairman Atkins has characterized certain cases resolved during that time as “not sufficiently grounded in the federal securities laws,” these figures, along with the government’s position before the Supreme Court, suggest that the SEC will continue to seek disgorgement in cases in which there may be no proof of investor harm, such as cases involving unregistered securities sales.[20] Nevertheless, the confirmed availability of a disgorgement remedy in cases without provable losses is unlikely to meaningfully shift the SEC’s enforcement priorities given its stated commitment to prioritizing cases involving investor harm and its emphasis on repaying investor losses.[21] 

Second, the outcome marks a limit on the Court’s recent trend of constraining SEC disgorgement remedies. Kokesh and Liu imposed meaningful limits on SEC disgorgement; Sripetch declines to extend those limits by adding a pecuniary loss requirement not grounded in traditional equitable principles. Notably, both Kokesh and Liu were decided by overwhelming majorities (9-0 and 8-1, respectively). Sripetch’s ruling, too, is supported by a unanimous Court. In this sense, Sripetch may demarcate an outer limit on the current Court’s appetite to welcome test cases seeking to read non-textual loss requirements into fraud statutes.

Conclusion

Sripetch confirms that SEC disgorgement remains a potent enforcement remedy. Although Kokesh and Liu continue to constrain disgorgement awards, the Court declined to impose a categorical pecuniary loss requirement. Companies and individuals therefore should not assume that conduct appearing “victimless” will avoid disgorgement exposure, particularly where the SEC can show ill-gotten gains and identify investors whose legally protected interests were invaded.