The Supreme Court Rejects Further Limits on SEC Disgorgement

On June 4, 2026, in Sripetch v. SEC, No. 25–466, the Supreme Court unanimously held that the Securities and Exchange Commission (SEC) need not prove that victims suffered a financial loss before obtaining a disgorgement award in a civil enforcement action. The Supreme Court case arose from the SEC’s civil enforcement action against Mr. Sripetch for engaging in numerous fraudulent penny-stock schemes. After consenting to entry of a judgment against him, Mr. Sripetch objected to the SEC’s effort to seek over $4.1 million in disgorgement, arguing that the SEC lacked evidence that his fraudulent schemes caused investors to suffer any financial losses and, as a result, there were no “victims” to receive disgorgement, as required under Liu v. SEC, 591 U.S. 71 (2020). 

The district court found the SEC had demonstrated that Mr. Sripetch’s investors had suffered pecuniary loss and did not decide whether proof of pecuniary loss was required in the first place. On appeal, the Ninth Circuit held that “a finding of pecuniary harm is not required” before a court orders disgorgement. The Ninth Circuit’s decision deepened an existing circuit split, with the First and Ninth Circuits having held that the SEC is not required to show pecuniary loss to obtain disgorgement, and the Second Circuit taking the opposite view and reasoning that, without a showing of pecuniary harm, there are no victims to whom the disgorged profits could be returned. 

The Court’s decision in Sripetch builds on two prior landmark rulings that shaped the SEC’s disgorgement authority. In Kokesh v. SEC, 581 U.S. 455 (2017), the Court held that because the disgorgement remedy had evolved into something resembling a civil penalty — with disgorged funds routinely sent to the US Treasury and amounts often exceeding a defendant’s actual profit — it was subject to the five-year statute of limitations in 28 U.S.C. §2462. Three years later, in Liu v. SEC, 591 U.S. 71 (2020), the Court held that 15 U.S.C. §78u(d)(5), which authorizes the SEC to seek “any equitable relief that may be appropriate or necessary for the benefit of investors,” permits disgorgement only if the remedy adheres to traditional equitable principles. Under Liu, any disgorgement award must be limited to the defendant’s net profits (not total revenues) and must be “awarded for victims” rather than deposited with the Treasury. Six months after Liu, Congress enacted §78u(d)(7), expressly adding “disgorgement” to the SEC’s list of statutory enforcement tools and establishing new limitations periods. It was against this backdrop that Mr. Sripetch argued Liu’s requirement that disgorgement be “awarded for victims” necessarily meant the SEC must prove pecuniary loss. 

Writing now for a unanimous Court, Justice Neil M. Gorsuch explained that traditional equitable principles governing disgorgement do not require proof of pecuniary loss. Unlike damages at law that measure the plaintiff’s loss, equitable disgorgement is measured by the defendant’s unjust gain from invading the plaintiff’s legally protected interests. The Court emphasized that under longstanding restitution principles, a victim who has suffered an interference with protected interests may recover the defendant’s wrongful gain “even when he has suffered ‘no measurable loss whatsoever.’” 

The Court rejected Mr. Sripetch’s argument that Liu required a showing of pecuniary loss. While Liu held that disgorgement must be “awarded for victims,” the Court clarified that traditional equitable principles do not demand pecuniary loss before a person qualifies as a “victim” entitled to a wrongdoer’s profits. The Court also rejected the concern that abandoning a pecuniary loss requirement would transform disgorgement into a penalty, noting that if the SEC were to use disgorgement to seek penalties for the Treasury rather than compensation for victims, that would raise separate questions about the scope of its authority—but would not justify imposing a requirement “foreign to Liu and to traditional equitable principles alike.” Notably, Justice Clarence Thomas filed a concurrence arguing that, following Congress’s enactment of §78u(d)(7), which authorized the SEC to seek “disgorgement” and separated it from other equitable remedies, disgorgement should now be treated as a legal remedy requiring a jury trial under the Seventh Amendment — an issue the majority expressly declined to resolve. 

Key Takeaways

The decision clarifies that the SEC may pursue disgorgement so long as a defendant’s conduct invaded investors’ legally protected interests, even absent proof of quantifiable financial harm to those victims. By rejecting the Second Circuit’s higher barrier to awarding disgorgement, which would require the SEC to prove that the victim suffered pecuniary harm, the decision maintains the SEC’s ability to pursue disgorgement in more litigated cases and settlements. While the Supreme Court made clear that respondents should not be able to retain the profit from wrongdoing (even absent a pecuniary loss from a victim), the Court left open significant questions: whether §78u(d)(7) frees the SEC from Liu’s requirement that disgorgement be “awarded for victims;” whether disgorgement may proceed when distribution to investors is infeasible; and, as Justice Thomas’s concurrence argues, whether Congress has made SEC disgorgement “a legal remedy,” which triggers the Seventh Amendment right to a jury trial.