At Sripetch Oral Argument, Supreme Court Weighs the Future of SEC Disgorgement

On April 20, 2026, the U.S. Supreme Court heard oral argument in Sripetch v. SEC to consider the limits of the SEC’s authority to seek disgorgement of a securities law violator’s ill-gotten gains.[1] Disgorgement is a critical tool for the SEC’s enforcement efforts. More than half of the $2.7 billion in monetary remedies the SEC obtained in fiscal year 2025 came in the form of an order to pay disgorgement.[2] The Court granted review in Sripetch to resolve a circuit conflict over the scope of that government authority. According to the government, if accepted, Sripetch’s view could drastically limit the SEC’s ability to obtain such remedies.

Background

When the SEC was first established by the Exchange Act, “the only statutory remedy available to the SEC in an enforcement action was an injunction barring future violations of securities laws.”[3] By the 1970s, however, the SEC persuaded courts to order disgorgement via a trial judge’s “inherent equity power to grant relief ancillary to an injunction.”[4] In the decades that followed, disgorgement awards that deprived defendants of any illegal profits from their violations became commonplace in SEC federal court cases.[5] In 2002, the disgorgement remedy found firmer footing when Congress, as part of the Sarbanes-Oxley Act, amended the Exchange Act to grant the SEC express authority to seek “any equitable relief” that “may be appropriate or necessary for the benefit of investors.”[6]

In 2020, the Supreme Court held in Liu that federal courts may order disgorgement that “does not exceed a wrongdoer’s net profits and is awarded for victims” as an equitable remedy in SEC enforcement actions.[7] Critically, however, the Court identified three limitations necessary to anchor disgorgement within the traditional bounds of equity practice: 1) disgorgement must generally be returned to wronged investors for their benefit; 2) joint-and-several liability for disgorgement is impermissible unless those defendants engaged in concerted wrongdoing; and 3) disgorgement must be measured by a defendant’s net profits from their wrongdoing after deducting legitimate expenses, if any.[8]

Post-Liu Amendments to Exchange Act Section 21(d)

Within a year of the Supreme Court’s decision in Liu, Congress amended Section 21(d) of the Exchange Act[9] to provide an express statutory basis for disgorgement in SEC enforcement actions:

• Subsection (d)(3) now provides that in an SEC enforcement action, federal courts have jurisdiction to “require disgorgement … of any unjust enrichment by the person who received such unjust enrichment as a result of such violation.”
• New subsection (d)(7) provides that “[i]n any action or proceeding brought by the Commission under any provision of the federal securities laws, the Commission may seek, and any Federal court may order, disgorgement.”
• New subsection (d)(8), which sets forth the limitations periods for any equitable remedy sought by the SEC in an enforcement case, establishes a statute of limitations framework specifically for the disgorgement remedy, separate from other equitable remedies.

This Congressional authorization did not foreclose lower court confusion about how Liu should be applied in practice to the SEC’s large and varied docket of litigated enforcement actions that implicate a wide array of violative conduct and dozens of different kinds of securities law violations and ways in which the charged wrongdoing could harm investor victims.

Circuit Split Over Requirement for Pecuniary Harm

Among the splits that developed after the amendment to Exchange Act Section 21(d) was whether the SEC must prove pecuniary harm to investors to obtain disgorgement. In 2023, the Second Circuit read Liu’s statement that disgorgement must generally be returned to wronged investors as requiring a showing of pecuniary harm. The court reasoned that absent a pecuniary harm, there are no victims to whom the disgorged profits could be returned. The First and Ninth Circuits later disagreed. Those courts reasoned that disgorgement is designed to deprive a wrongdoer of their ill-gotten gains, and traditional equity practice never conditioned the remedy on proof of victim harm.[10] Meanwhile, the Fifth and Eleventh Circuits each concluded that, given the amendments to Section 21(d) of the Exchange Act, Liu’s equitable limitation that disgorgement must generally be returned to wronged investors may not apply at all to SEC disgorgement. Both courts relied on Congress’s omission of subsection (d)(5)’s requirement that the relief be “for the benefit of investors” when it authorized courts to award disgorgement in new subsection (d)(7) and in amended subsection (d)(3).[11]

At argument, Sripetch defended the pecuniary harm requirement and urged the Court to limit disgorgement to whatever investor harm the SEC is able to reliably prove and distribute to identifiable victims. The issue is significant. For example, in SEC enforcement matters involving public companies and their executives, investor harm from the charged misconduct will often be diffuse, difficult to quantify and likely infeasible to remedy through a return of collected disgorgement to harmed investors. The same is true for insider trading cases given the challenges of quantifying and identifying the pecuniary harm caused by such conduct. If the Exchange Act is interpreted as allowing violators to keep their ill-gotten gains so long as the corresponding losses can’t be traced to individual victims, the SEC’s ability to obtain disgorgement in fraud cases involving public investors could be curtailed significantly.

Takeaways From Oral Argument

The one-hour oral argument before the Supreme Court provided clues about the direction that the Justices are leaning in this important dispute.

First, the Supreme Court appeared poised to reject Sripetch’s proposed limits on the disgorgement remedy. In their questioning, Justices Thomas, Jackson, Barrett, Sotomayor and Gorsuch at times implied support for the Commission’s argument that the 2021 amendments and their omission of language requiring that disgorgement be “necessary or appropriate for the benefit of investors” abrogated Liu’s 2020 statement that disgorgement must generally be returned to wronged investors. Meanwhile, Justices Jackson, Sotomayor and Kagan asked questions suggesting that, even setting aside the 2021 amendments, they may be persuaded that pecuniary harm to victims was not a traditional equitable limitation on the disgorgement remedy. At no juncture did the Justices elicit support for the proposition that disgorgement should be rigidly capped by what the Commission is able to actually distribute, or that disgorgement is wholly unavailable when a violation’s diffuse or attenuated harm to public investors renders such a distribution infeasible.

Second, several Justices explored the implications of broader disgorgement authority. Justices Sotomayor, Kavanaugh, Gorsuch and Chief Justice Roberts explored whether, if disgorgement need not be awarded for victims, the remedy would lose its equitable character. If so, the Justices questioned whether disgorgement under the Exchange Act may be transformed from an equitable remedy to a legal remedy for which a jury trial is guaranteed by the Seventh Amendment under the Supreme Court’s decision in SEC v. Jarkesy.[12]

Third, the bulk of the questioning suggested that the Supreme Court’s decision is likely to be grounded in the 2021 Exchange Act amendments. These statutory amendments reflect a shift in the disgorgement landscape since Liu and would avoid broader pronouncements about disgorgement in other contexts. Although such a decision could potentially open the door to a Seventh Amendment jury trial right in SEC cases seeking disgorgement, it seems unlikely that the Court would resolve that question in this case. A concurring opinion exploring that issue, however, would not be surprising.

The Court is expected to rule in Sripetch by the end of June or early July. As it did six years ago in Liu, the Supreme Court’s ruling will likely provide additional clarity to SEC disgorgement, but that clarity may bring with it new and unsettled questions.

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[1] Sripetch v. SEC, No. 25-466 (Jan. 9, 2026).

[2] SEC Announces Enforcement Results for Fiscal Year 2025, available at: https://www.sec.gov/newsroom/press-releases/2026-34. The Commission’s $2.7 billion figure excludes disgorgement ordered but deemed satisfied by monetary relief ordered in other non-SEC actions, for example, a parallel criminal restitution or forfeiture order against the same defendant.

[3] Kokesh v. SEC, 581 U.S. 455, 458 (2017).

[4] SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (S.D.N.Y. 1970), aff’d in part and rev’d in part, 446 F.2d 1301 (2d Cir. 1971).

[5] See, e.g., SEC v. Manor Nursing, 458 F.2d 1082, 1104 (2d Cir. 1972) (“The deterrent effect of an SEC enforcement action would be greatly undermined if securities law violators were not required to disgorge illicit profits”); SEC v. MacDonald, 699 F.2d 47, 54 (1st Cir. 1983); SEC v. First Pacific Bancorp., 142 F.3d 1186, 1191-92 (9th Cir. 1998); SEC v. Hughes Capital Corp., 124 F.3d 449, 455 (3rd Cir. 1997); SEC v. First City Fin. Corp., 890 F.2d 1215, 1230 (D.C.Cir.1989).

[6] Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, § 305, 116 Stat. 745, 779 (2002) (codifying Exchange Act Section 21(d)(5), which provides that “[i]n any action or proceeding brought or instituted by the Commission under any provision of the securities laws, the Commission may seek, and any Federal court may grant, any equitable relief that may be appropriate or necessary for the benefit of investors.”).

[7] Liu v. SEC, 591 U.S. 71, 74-75 (2020).

[8] Id. at 82-83, 85, 87-92. Justice Thomas dissented from the majority opinion after concluding that “disgorgement is not a traditional equitable remedy,” that “[a]s an initial matter, it is not even clear what ‘disgorgement’ means,” and that “[d]isgorgement is a ‘relic of the heady days’ of courts inserting judicially created relief into statutes.” Id. at 93-97.

[9] 15 U.S.C. § 78u(d).

[10] SEC v. Sripetch, 154 F.4th 980 (9th Cir. 2025); SEC v. Navellier & Associates, Inc., 108 F.4th 19, 41 n.14 (1st Cir. 2024) (“Neither Liu nor our case law … require investors to suffer pecuniary harm as a precondition to a disgorgement award.”).

[11] SEC v. Spartan Securities Group, Ltd., 164 F.4th 1231, 1265-69 (11th Cir. 2026); SEC v. Hallam, 42 F.4th 316, 340-41 (5th Cir. 2022) (“[W]e conclude that Sections 78u(d)(3) and (d)(7) authorize legal ‘disgorgement’ apart from the equitable ‘disgorgement’ permitted by Liu.”).

[12] 603 U.S. 109 (2024).