The U.S. District Court for the Middle District of Florida recently entered a decision that significantly curtails the power of the Securities and Exchange Commission to pursue ill-gotten gains from relief defendants in an SEC enforcement action. (See SEC v. Founding Partners Capital Mgmt., No. 2:09-cv-229-FtM-29SPC, 2009 WL 1606491, M.D. Fla. June 8, 2009.)

A relief defendant has no ownership interest in the property that is the subject of litigation but may be joined in a lawsuit to aid in the recovery of relief. In Founding Partners, the court dismissed purported relief defendants Sun Capital Inc. and Sun Capital Healthcare Inc. after finding that the Sun Capital entities had a “legitimate ownership interest” in funds received pursuant to a series of written loan agreements with the defendants.

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