The U.S. Supreme Court has formally limited the ability of the Securities and Exchange Commission (SEC) to recover illegal profits from defendants, placing new restrictions on one of the agency’s most powerful legal weapons.
While the court’s 8-1 ruling reaffirmed the SEC’s authority to seek disgorgement, which is used by courts to return funds from fraudulent schemes to wronged investors, it also barred the often abused tool from going any further by stating that it cannot exceed the net profits of the conduct at issue.
According to a recent Bloomberg Law article, the agency typically wins more than $1 billion in disgorgement orders in federal courts annually. This figure does not include SEC fines, which the agency is permitted to use as punishment.
This decision was reached through an appeal placed by a California couple, Charles Liu and Xin Wang, who had been ordered to disgorge nearly $27 million, the amount they defrauded from foreign investors for a never-built cancer treatment center.
If you have any questions regarding the Supreme Court’s recent ruling on the SEC’s ability to seek disgorgement, please do not hesitate to contact us. Our firm has proven legal expertise in counseling both entrepreneurs and established companies on ongoing SEC and state securities compliance issues. Contact Busch, Slipakoff, Mills and Slomka to learn more.