Unanimous Court Upholds SEC’s Broad Disgorgement Authority

In Sripetch v. Securities and Exchange Commission, 608 U.S. ___ (2026), the U.S. Supreme Court held that the Securities and Exchange Commission (SEC) need not prove that investors suffered actual financial losses to obtain disgorgement in an enforcement action.  The Court’s decision was unanimous.

Facts of the Case

Ongkaruck Sripetch engaged in numerous fraudulent schemes involving at least 20 penny-stock companies. On discovering the schemes, the SEC brought a civil enforcement action against Sripetch, charging him with six counts of securities fraud and one count of selling unregistered securities. Sripetch consented to the entry of judgment against him and agreed that the court could order disgorgement.

When the SEC proceeded to seek over $4.1 million in disgorgement, however, Sripetch objected. He argued that the SEC’s request violated Liu v. SEC, 591 U.S. 71 (2020), because the SEC lacked evidence that his schemes caused investors to suffer any financial losses. On appeal, the Ninth Circuit Court of Appeals rejected Sripetch’s argument, deepening a split among the Courts of Appeals. While the First and Ninth Circuits have held that the SEC may obtain disgorgement without proving investors have suffered pecuniary loss, the Second Circuit has taken the opposite view.

Supreme Court’s decision

The Supreme Court unanimously affirmed, holding that a showing of pecuniary loss to investors is not required before the Securities and Exchange Commission (SEC) may obtain a disgorgement award. Justice Neil Gorsuch wrote on behalf of the Court.

In his opinion, Justice Gorsuch first addressed the statutory provisions at issue. Section 78u(d)(5) allows the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors.” Liu held this provision permits a court to order disgorgement so long as the remedy adheres to traditional equitable principles. After Liu, Congress adopted §78u(d)(7), which expressly allows the SEC to seek disgorgement in enforcement proceedings.

According to the Court, it did not need to address whether or how §78u(d)(7) affects the scope of the SEC’s disgorgement powers because even assuming that disgorgement under §78u(d)(7) remains an equitable remedy that must comply with traditional equitable rules, a showing of pecuniary loss to investors is not required before the SEC may obtain disgorgement.

In reaching its decision, the Court relied on traditional equitable principles, as well as the distinction between disgorgement and damages. As Justice Gorsuch explained:

Historically, equity has provided a different option in certain circumstances. After a showing that the defendant interfered with the plaintiff ’s legally protected rights, courts sitting in equity have long issued remedies designed to “depriv[e] wrongdoers of their net profits from unlawful activity.” These remedies have taken varying forms and gone under different names, “restitution” and “disgorgement” among them. All come with important limitations. For our purposes in this case, though, only one common feature matters: Generally, the final award to the plaintiff is not measured by his loss but by the defendant’s gain attributable to his wrongdoing against the plaintiff.

The Court went on to reject the argument that Liu announced a rule requiring the SEC to make a showing of pecuniary loss before securing disgorgement.According to the Court, while Liu held that disgorgement must be “awarded for victims,” it drew this requirement from traditional equitable principles, and those principles do not demand a showing of pecuniary loss before a person may qualify as a “victim” entitled to an award of a wrongdoer’s profits.