According to the article, No Harm, No Foul? Not Anymore: What Sripetch Means for SEC Defendants, in early June 2026, the U.S. Supreme Court issued its 9-0 decision in Sripetch v. Securities and Exchange Commission, holding that the U.S. Securities and Exchange Commission (SEC) can retrieve ill-gotten gains from alleged securities-law violators without having to prove that victims of those violations suffered a pecuniary loss. Sripetch is the most recent decision in a series of U.S. Supreme Court cases analyzing the SEC’s disgorgement powers.

The SEC’s History

When the SEC was established by the Securities Exchange Act of 1934, it lacked congressional authorization to pursue monetary remedies for federal securities-law violations. Instead, the SEC’s only statutory remedy was to seek a judicial injunction prohibiting future breaches of the securities laws. Accordingly, for many decades, the SEC was not statutorily empowered to order a defendant to disgorge ill-gotten gains to aggrieved investors. 

However, in the 1970s, a new trend emerged. The SEC successfully urged lower courts to require securities-law violators to disgorge their illicit profits under the courts’ inherent equitable authority to award relief ancillary to an injunction. In the decades that followed, the U.S. Supreme Court would issue three opinions interpreting the limits of the Commission’s disgorgement power.

Kokesh v. Securities and Exchange Commission

Kokesh, the first case in this three-part series, held that disgorgement was effectively a civil penalty under 28 U.S.C. § 2462. This meant that the SEC would have to commence any disgorgement claim within five years of accrual. In reaching this holding, however, Kokesh failed to address whether courts had authority to mandate disgorgement in SEC enforcement actions in the first instance, nor did it consider whether courts had correctly applied disgorgement principles. 

Liu v. Securities and Exchange Commission

The Court resolved those questions three years later in Liu. Although “disgorgement” remained absent from its list of statutory remedies, the SEC contended that 15 U.S.C. § 78u(d)(5)’s reference to “equitable relief” was sufficiently broad to authorize its established practice of pursuing disgorgement awards. Although the Court agreed with the SEC that “equitable relief” encompassed disgorgement, it also expressly recognized two limitations on the SEC’s disgorgement power. 

First, the Court limited disgorgement awards to a wrongdoer’s net profits—as opposed to their total revenues—arising from the underlying securities-law violation. This ensured the remedy was not transformed into a punitive sanction. Second, any amounts the SEC recovered were to be distributed to “victims.” If both of these conditions were met, the disgorgement award qualified as “equitable relief” permissible under 15 U.S.C. § 78u(d)(5). 

Liu clarified the Kokesh decision. Kokesh held that the five-year limitations period under 28 U.S.C. § 2462 governed disgorgement actions because at that time, Kokesh equated disgorgement to a civil penalty. But as Liu explained, disgorgement going forward had to conform to traditional equitable principles, which do not permit the imposition of penalties.

Six months after Liu, Congress refined the scope of the SEC’s disgorgement powers. In doing so, it maintained the SEC’s power to seek “equitable relief” under § 78u(d)(5), while also adding “disgorgement” as an enforcement tool for securities-law violations under 15 U.S.C. § 78u(d)(7). 

Sripetch v. Securities and Exchange Commission

In Sripetch, the U.S. Supreme Court handed down its third landmark decision in its SEC disgorgement trilogy, resolving a circuit split involving the First, Second, and Ninth Circuits. The First and Ninth Circuits held that disgorgement does not require proof of pecuniary harm. While both Circuits recognized Liu’s directive that disgorgement must be awarded to “victims,” they rejected the contention that the term “victim” should be confined to those who have suffered pecuniary loss. 

The Second Circuit took the opposite view, interpreting SEC disgorgement requests as violating Liu where the SEC lacked evidence that wronged investors suffered financial losses. This interpretation was premised on the Second Circuit’s incorrect belief that under Liu, an investor who did not suffer pecuniary loss did not qualify as a “victim” for whom disgorgement could be awarded. 

Without resolving whether disgorgement under § 78u(d)(7) is an equitable remedy—which, if true, would require disgorgement awards to be distributed to victims—Sripetch aligned with the First and Ninth Circuits. Accordingly, a wronged investor may qualify as a “victim” entitled to disgorgement awards under either § 78u(d)(5) or § 78u(d)(7), even when they have not suffered any financial loss whatsoever. 

What This Means for Defendants and Regulated Entities

Sripetch declined to impose additional limits on the SEC’s disgorgement authority six years after it last did so in Liu. Today, under equitable principles, a wronged investor’s recovery is measured not by his loss, but by the defendant’s illicit gains. Thus, the aim of a disgorgement award is to require the defendant to disgorge the benefits obtained from wrongfully invading the plaintiff’s legally protected interests, rather than to compensate the plaintiff for financial loss. 

The Sripetch opinion perfectly distilled the equity principles governing SEC disgorgement: “a defendant can unjustly enrich himself even without leaving a plaintiff worse off financially, and in those instances, a court must choose between two status quos: It can either restore the defendant to his prior position by stripping him of his unjust gains, or it can allow the defendant to benefit from his misconduct because the plaintiff’s financial position has not changed. Equity traditionally prefers the first outcome, not the second.” 

For defendants, the practical implication is stark: disgorgement exposure is no longer bounded by investor harm. Even in cases involving technical violations or regulatory non-compliance where no investor lost a dollar, the SEC may now seek—and courts may award—disgorgement of all net profits traceable to the alleged violation. Defendants can no longer rely on a clean investor impact record as a natural ceiling on the SEC’s recovery. The relevant measure is the defendant’s gain, not the investor’s loss, which in many cases will be a significantly larger number.

That said, Liu’s limitation on disgorgement—that awards must be capped at net profits rather than gross revenues—remains the most important lever available to defendants seeking to reduce exposure. Because legitimate business expenses and costs can be deducted from the disgorgement base, defendants facing enforcement actions should invest early in identifying and documenting all deductible expenses attributable to the underlying conduct. The difference between gross revenue and net profit can be substantial, and the accounting work done at the outset of an investigation often determines the scope of a defendant’s ultimate disgorgement liability.

Considerations for the Future

In Sripetch, the U.S. Supreme Court did not foreclose the possibility of hearing another disgorgement case in the future. The Court acknowledged concerns that the SEC may seek disgorgement awards not on behalf of investors, but instead to channel funds to the U.S. Treasury. For defendants, this signals a potential avenue to challenge disgorgement claims under § 78u(d)(7) where the recovery appears designed to benefit the Treasury rather than to compensate identifiable investors. 

Moreover, in his concurrence, Justice Thomas addressed questions arising from the addition of “disgorgement” to the list of enforcement tools under § 78u(d)(7). For example, because § 78u(d)(7) separately codifies disgorgement into its own subsection with a distinct limitations period—apart from the general authorization of equitable relief—courts must now determine whether disgorgement constitutes a “legal remedy” for which the Seventh Amendment requires a jury trial. If courts ultimately resolve this question in favor of characterizing § 78u(d)(7) disgorgement as a legal remedy, defendants would be entitled to a jury trial on disgorgement—a potentially significant procedural advantage in SEC enforcement actions. 

Discussion Questions

  1. Define the Securities and Exchange Commission (SEC) and explain its regulatory authority.

    The SEC is an independent federal agency that was created in 1934 to restore confidence in U.S. capital markets after the 1929 stock market crash. It oversees major segments of the securities industry, including securities offerings, securities trading, asset management, and investment advisory services. The SEC’s regulatory authority, established in laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934, empowers the agency to require corporate disclosure, regulate broker‑dealers and investment advisers, maintain fair and efficient markets, and protect investors by enforcing rules against fraud, market manipulation, and other misconduct.

  2. What is disgorgement?

    Disgorgement is an equitable remedy that requires a person who gained profits through illegal or wrongful conduct to give up those ill‑gotten gains, thereby preventing unjust enrichment and ensuring that the wrongdoing does not remain financially rewarding. Courts treat disgorgement as equitable relief, meaning its purpose is to take the wrongdoer’s net profits rather than punish them. Disgorgement is commonly used in cases involving securities fraud, insider trading, accounting misconduct, and other financial violations, often alongside penalties or restitution.

  3. As mentioned in the article, the U.S. Supreme Court issued a unanimous (9-0) decision in Sripetch v. Securities and Exchange Commission. Given the current political divisiveness in the United States and its government, are you surprised that the Supreme Court vote was unanimous? Why or why not? 

    This is an opinion question, so student responses may vary.

    In your author’s opinion, the Sripetch unanimous decision should come as no surprise. As the article indicates, judicial acknowledgment of disgorgement as a remedy dates to the 1970s, with the Supreme Court refining this remedy in a trilogy of decisions: (1) Kokesh v. Securities and Exchange Commission; (2) Liu v. Securities and Exchange Commission; and (3) the Sripetch decision itself. It is your author’s belief that Sripetch is a logical and fitting end to the five-decade “trajectory” of the law regarding disgorgement.