In the years after the 1929 stock market crash and the Great Depression, Congress enacted laws giving the Securities and Exchange Commission power to promulgate rules and regulations and to initiate enforcement actions in federal court. Before Congress authorized the SEC to seek monetary remedies for security law violations, the SEC’s only power was injunctive. The SEC urged the courts to order wrongdoers to relinquish gains attributable to their wrongdoing, an order known as “disgorgement” and defined as a form of restitution.
In 1990, as part of the Security Enforcement Remedies and Penny Stock Reform Act, the SEC was authorized to seek monetary civil penalties. Several years ago, the U.S. Supreme Court held that the five-year statute of limitations set forth in 28 U.S.C. §2462, applied when the SEC was seeking monetary penalties. A question which, until now—in Kokesh v. SEC—had not been answered by the court is whether or not disgorgement applications are also governed by the five-year statute of limitations. The circuit courts had split on the answer.
