Kokesh v. SEC:  U.S. Supreme Court Holds That a Five-Year Statute of Limitations Applies When the SEC Seeks Disgorgement in Enforcement Actions: The Decision Builds Upon the Court’s 2013 Holding That the Statute of Limitations Applies When the SEC Seeks Civil Monetary Penalties

Sullivan & Cromwell LLP - June 6, 2017

Yesterday, the U.S. Supreme Court resolved a split among three Circuit Courts of Appeals concerning whether the five-year statute of limitations of 28 U.S.C. § 2462 applies to SEC enforcement actions seeking disgorgement.  In Kokesh v. SEC, No. 16-529, the Court unanimously held that in SEC enforcement actions, disgorgement operates as a penalty and is therefore subject to the five-year limitations period.  After Kokesh, the SEC no longer may use disgorgement to obtain money from defendants for claims that accrue outside the five-year limitations period.  Kokesh also may apply to enforcement actions brought by other government agencies, such as the CFTC.  Companies facing government enforcement actions should consider the limitations on disgorgement during any settlement or tolling agreement discussions.