The Supreme Court will hear oral arguments on April 20, 2026, in Sripetch v. Securities and Exchange Commission, a case that could significantly affect the scope of the Securities and Exchange Commission’s (SEC) authority to obtain disgorgement in civil enforcement actions.
Disgorgement requires violators of securities laws to surrender profits obtained through misconduct, rooted in principles of restitution and unjust enrichment. The remedy aims to deprive wrongdoers of ill-gotten gains rather than to compensate specific victims directly, though modern applications have evolved considerably. Initially, the agency relied primarily on injunctions to halt ongoing violations. Over time, courts recognized disgorgement as ancillary equitable relief, particularly in insider-trading cases where statutes were silent, framing it as a means to “put the cookies back in the jar” by returning unlawful profits.
The Sarbanes-Oxley Act of 2002 expanded the SEC’s toolkit by authorizing civil monetary penalties explicitly for deterrence. Disgorgement, however, remained classified as equitable relief. In practice, the agency often sought broad disgorgement orders, sometimes imposing joint-and-several liability, disregarding legitimate expenses, and directing funds to the U.S. Treasury rather than identified victims. This approach raised questions about whether disgorgement had shifted toward a punitive character.
Recent Supreme Court rulings have imposed constraints. In Kokesh v. SEC (2017), the Court determined that disgorgement in SEC actions functions more as a penalty than pure restitution, subjecting it to the five-year statute of limitations applicable to civil penalties. In Liu v. SEC (2020), the Court further limited equitable disgorgement, requiring it to align with traditional equitable principles: targeting identifiable victims (rather than joint liability), restricting awards to net profits after deducting legitimate business expenses, and directing funds to harmed parties rather than retaining them indefinitely in government accounts. These precedents left open a key issue: whether the SEC must demonstrate that investors suffered actual pecuniary (financial) harm to justify disgorgement, or if it suffices to show interference with investors’ legal interests through fraud, manipulation, or misleading conduct.
The current case arises from an SEC civil enforcement action against Ongkaruck Sripetch involving alleged securities violations related to penny-stock schemes. These included pump-and-dump operations, fraudulent scalping, sales of unregistered securities, and cross-trading. Sripetch consented to liability on the underlying violations but contested the disgorgement amount sought by the SEC (over $4 million initially requested). The district court ordered approximately $2.25 million in disgorgement plus prejudgment interest. Sripetch argued that the SEC failed to prove investors suffered pecuniary harm.
The Ninth Circuit affirmed the award in SEC v. Sripetch (2025). The Court held that disgorgement under 15 U.S.C. § 78u(d)(5) and (d)(7) does not require proof of pecuniary harm to investors. Instead, it suffices to establish an actionable interference with legally protected interests – emphasizing that disgorgement focuses on depriving the wrongdoer of gains, not on compensating losses as in private damages actions.
This created a circuit split: the Second Circuit demands pecuniary harm, while the First and Ninth Circuits do not. Both Sripetch and the SEC supported certiorari, acknowledging the issue’s recurrence and national importance. The Supreme Court granted the petition on January 9, 2026.
In 2024, the SEC collected a record $6.1 billion in disgorgement, underscoring the remedy’s centrality to enforcement. A ruling requiring proof of pecuniary harm would raise the evidentiary bar, particularly in cases involving diffuse market harm, high-volume trading, or schemes where tracing specific investor losses is challenging. This might lead the agency to pursue fewer cases, rely more on penalties, or adjust settlement strategies. Conversely, affirming the broader view (as adopted by the Ninth Circuit) would preserve the SEC’s flexibility, allowing disgorgement based on proven misconduct and profits without needing to quantify direct financial injury to every investor.
The case fits into a broader pattern of Supreme Court scrutiny of administrative authority, including limits on agency deference and enforcement mechanisms. A decision is expected by late June or early July 2026 and may provide clarity on the boundaries of SEC disgorgement power, influencing enforcement priorities, compliance considerations, and the resolution of future securities violations.