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Unpacking the SEC’s new disgorgement powers

Unpacking the SEC’s new disgorgement powers To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek disgorgement in federal district court proceedings and to codify applicable statutes of limitations.Design/methodology/approachThis article provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and summarizes how the scope of the remedy has evolved since Kokesh v. SEC (2017). Then, the article analyzes the changes to the Securities Exchange Act of 1934 contained in Section 6501 the 2021 National Defense Authorization Act (NDAA), which statutorily empowered the SEC to seek and obtain disgorgement in federal court actions. Finally, the authors discuss the impact of the legislation on the Supreme Court’s decisions in Kokesh and Liu v. SEC (2020).FindingsThe availability and appropriateness of SEC disgorgement have been the subject of vigorous debate. Just as courts began to iron out the contours of SEC disgorgement in the wake of Kokesh and Liu, Congress intervened by granting to the SEC explicit statutory authority to seek a remedy traditionally obtained at equity. In passing this legislation, Congress answered some questions that remained after Liu but also raised many new ones. These new questions will likely take years to resolve through subsequent litigation and potentially additional legislation.Originality/valueOriginal, practical analysis and guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Investment Compliance Emerald Publishing

Unpacking the SEC’s new disgorgement powers

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Publisher
Emerald Publishing
Copyright
© King & Spalding LLP.
ISSN
1528-5812
DOI
10.1108/joic-02-2021-0008
Publisher site
See Article on Publisher Site

Abstract

To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek disgorgement in federal district court proceedings and to codify applicable statutes of limitations.Design/methodology/approachThis article provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and summarizes how the scope of the remedy has evolved since Kokesh v. SEC (2017). Then, the article analyzes the changes to the Securities Exchange Act of 1934 contained in Section 6501 the 2021 National Defense Authorization Act (NDAA), which statutorily empowered the SEC to seek and obtain disgorgement in federal court actions. Finally, the authors discuss the impact of the legislation on the Supreme Court’s decisions in Kokesh and Liu v. SEC (2020).FindingsThe availability and appropriateness of SEC disgorgement have been the subject of vigorous debate. Just as courts began to iron out the contours of SEC disgorgement in the wake of Kokesh and Liu, Congress intervened by granting to the SEC explicit statutory authority to seek a remedy traditionally obtained at equity. In passing this legislation, Congress answered some questions that remained after Liu but also raised many new ones. These new questions will likely take years to resolve through subsequent litigation and potentially additional legislation.Originality/valueOriginal, practical analysis and guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement.

Journal

Journal of Investment Compliance – Emerald Publishing

Published: Jul 17, 2021

Keywords: U.S. Securities and Exchange Commission (SEC); Disgorgement; Kokesh v. SEC; Liu v. SEC; Securities laws; National Defense Authorization Act (NDAA)

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