Supreme Court Holds That The SEC Is Not Required To Demonstrate That Investors Suffered Financial Losses In Disgorgement Actions

Summary

Since the 1970s, the Securities and Exchange Commission (SEC) has asserted the right to obtain disgorgement of profits from those who violate the securities laws. In a series of recent cases, the Supreme Court set limits on that remedy. One disputed question was whether, as a condition of seeking disgorgement, the SEC must prove that victims have suffered a financial loss. On June 4, 2026, in Sripetch v. SEC, the Supreme Court, resolving a split among the circuits, unanimously answered no. It held that, under traditional equitable principles, a defendant may be required to disgorge unjust gains regardless of whether the SEC can demonstrate that investors had pecuniary losses. The Court in Sripetch continued to leave open, however, whether disgorgement was still available to the SEC when the precise victims could not be identified, distribution was otherwise infeasible, or investor losses remained unquantifiable.

Moreover, in a concurring opinion, Justice Clarence Thomas stated that, in his view, disgorgement had become a “legal” remedy and, therefore, defendants had a Seventh Amendment right to a jury trial in disgorgement actions. Thus, Sripetch may not be the Court’s last opinion in this area.

The legal setting

In 2017, the Court held in Kokesh v. SEC that disgorgement amounted to a civil penalty for limitations purposes and was subject to the statutory five-year statute of limitations regarding penalties. But, in a footnote, the Court expressly noted that it was not deciding “whether courts possess authority to order disgorgement in SEC enforcement proceedings” and “whether courts have properly applied disgorgement principles in this context.” In 2020, the Court decided Liu v. SEC, in which it confirmed the SEC’s right to seek disgorgement as a form of equitable relief, while stating that disgorgement was subject to certain equitable limitations. These limitations included that (i) disgorgement amounts cannot exceed net profits, and (ii) amounts secured must be “awarded for victims.” In response to Liu, Congress enacted 15 U.S.C. § 78u(d)(7), which provided that “[i]n any action or proceeding brought by the Commission under any provision of the securities laws, the Commission may seek, and any Federal court may order, disgorgement.” These developments still left open at least two questions: whether the SEC still needed to establish that the victims suffered a pecuniary loss and whether the SEC could still obtain disgorgement when distribution to victims was infeasible and the amount of any loss difficult to calculate.

Sripetch background

Ongkaruck Sripetch consented to an entry of judgment against him for engaging in fraudulent schemes with penny stocks. He and his co-conspirators would allegedly obtain shares of thinly capitalized companies, promote the companies using fraudulent and manipulative tactics, and then sell the shares they controlled when the price rose. When the SEC discovered this scheme, it brought a civil enforcement action. 

Along with the entry of judgment, Sripetch agreed that the court could order disgorgement. However, when the SEC sought a $4.1 million disgorgement award, he objected. Sripetch argued that the SEC’s request violated Liu because the SEC lacked evidence proving that his scheme financially harmed investors, for whom disgorgement could be awarded. 

The district court concluded that the SEC had made a sufficient showing that Sripetch’s investors had suffered pecuniary losses. On appeal, the Ninth Circuit affirmed more broadly. It held that although disgorgement must be “for victims,” a “victim” does not have to be “narrowly defined” as having “suffered pecuniary harm.” Instead, under the common law, a disgorgement only requires proof of “an actionable interference by the defendant with the claimant’s legally protected interests.” Id. (quoting Restatement (Third) of Restitution and Unjust Enrichment § 51(1) (2010)). Thus, the SEC did not need to prove pecuniary loss at all.

As we noted in January, the Supreme Court granted certiorari to resolve a deepening dispute among the circuits as to whether the SEC must prove pecuniary loss in order to obtain disgorgement.

The Supreme Court’s decision

In a unanimous opinion written by Justice Neil Gorsuch, the Supreme Court held that “a showing of pecuniary loss is not required” for the SEC to obtain a disgorgement award.

The Court began by sidestepping a statutory question. The parties had disputed whether the addition of Section 78u(d)(7) affected the SEC’s disgorgement powers. Existing Section 78u(d)(5) authorizes the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors.” Enacted six months after the Liu decision, Section 78u(d)(7) specifically empowers the SEC to seek disgorgement without mention of equity. Sripetch argued that the same equitable constraints that Liu held applicable under Section 78u(d)(5) continued to apply under Section 78u(d)(7). The SEC contended that, while it was still bound by certain equitable limits so that disgorgement needed to be limited to the defendant’s unjust enrichment, as a result of Section 78u(d)(7), it did not have to connect the unlawful profits it sought to disgorge to any specific victims. The SEC further contended that the government could resume its former practice of keeping disgorgement awards for itself in certain circumstances. 

The Court determined that it did not need to resolve that statutory dispute. Instead, it assumed that, under both provisions, disgorgement remained an equitable remedy and, therefore, looked to traditional equitable principles to answer the question on appeal.

Equitable principles can be contrasted with legal ones. A legal remedy aims to restore the plaintiff to as good a position as the plaintiff would have been in but for the defendant’s wrongdoing. Legal damages are, therefore, measured by the amount lost. By contrast, equitable actions aim to achieve fairness and restore the status quo by depriving wrongdoers of their ill-gotten gains and preventing unjust enrichment. Thus, “courts sitting in equity have long issued remedies designed to ‘depriv[e] wrongdoers of their net profits from unlawful activity.’”

According to the Court, disgorgement remedies, ordered under the inherent equitable powers of the court, redress the “wrongful invasion of the plaintiff’s legally protected rights.” Proof of pecuniary loss is unnecessary because such remedies do not seek to compensate the victims for their losses. Rather, they “restore the defendant to his prior position by stripping him of his unjust gains.”

Looking ahead

The Court assumed, without deciding, that disgorgement is an equitable remedy and restated the limitations set forth in Liu, including that amounts secured should be “awarded for victims.” As a result, it left open certain questions that litigants have raised concerning disgorgement. In particular, if disgorgement remains an equitable remedy, will the SEC be permitted to argue that it is infeasible to trace victim losses, so that collected funds can be sent to the Treasury instead? If so, what showing must the SEC make under those circumstances? 

In his concurrence, Thomas reconsidered the assumption that disgorgement is an equitable remedy, following the enactment of Section 78u(d)(7). He argued that if disgorged amounts are routinely sent to the Treasury, rather than to harmed investors, disgorgement would constitute a penalty. As a penalty, it would be a legal, rather than equitable, remedy. Therefore, defendants would have a Seventh Amendment right to a jury trial whenever disgorgement is on the table. Thomas began his concurrence with a reference to SEC v. Hallamand ended by contrasting it with SEC v. Ahmed, cases reflecting an ongoing circuit split as to whether disgorgement is equitable or legal relief, implicating the Seventh Amendment.

Read the opinion here.

Footnotes

1 Sripetch v. SEC, No. 25–466, slip op. (U.S. June 4, 2026).

2 581 U.S. 455 (2017). 

3 Id. at 461 n.3.

4 591 U.S. 71 (2020).

5 The earlier provision, used in Kokesh and Liu, for instance, allowed the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors.” 15 U.S.C. § 78u(d)(5). The new provision no longer characterizes disgorgement as equitable relief. 

6 154 F.4th 980, 986 (9th Cir. 2025). 

7 Liu raised a question about the SEC’s practice of obtaining disgorgement even when distribution was infeasible (in which case collected funds would be sent to the Treasury). In answer, the Second Circuit held that the SEC would need to prove pecuniary loss to obtain disgorgement orders, removing the bar for the SEC. SEC v. Govil, 86 F.4th 89 (2d Cir. 2023). The First Circuit disagreed, holding that the SEC need not demonstrate that an investor suffered monetary harm in order to obtain disgorgement. SEC v. Navellier, 108 F.4th 19 (1st Cir. 2024), (cert. denied) 145 S. Ct. 2777, (2025), (reh’g denied), 222 L. Ed. 2d 1186 (Aug. 18, 2025). As indicated, the Ninth Circuit aligned itself more with the First Circuit. 

8 Sripetch, No. 25–466, slip op. at 8 (quoting Liu, 591 U.S., at 79).

9 Id. at 9.

10 Id. at 11.

11 42 F.4th 316 (5th Cir. 2022).

12 72 F.4th 379, 395 (2d Cir. 2023).