Headquarters of the U.S. Securities and Exchange Commission.
The June 22, 2020 decision in Liu v. SEC saw the Supreme Court answer a question that has been front-and-center for securities litigators since 2017: Can federal courts order disgorgement in SEC enforcement proceedings despite lacking explicit statutory authority to do so? In an 8-1 opinion, the court held that “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible under” the securities laws. 591 U.S. __, at *1.
In other words, disgorgement is equitable, so long as it is done the right way. Otherwise, it would constitute a penalty, and fall outside the scope of remedies Congress authorized the SEC to seek. This has meaningful repercussions for securities defendants facing the prospect of multi-million-dollar disgorgement orders.
