On June 4, 2026, the Supreme Court of the United States released its unanimous opinion in the case Sripetch v. SEC, 146 S. Ct. 1403 (2026). The Court granted certiorari to address a widening division among the Circuit Courts of Appeals as to whether the SEC must demonstrate evidence of investor losses when seeking enforcement by use of disgorgement. Upon review, the Court ultimately held that the SEC is not required to show a pecuniary loss to investors when pursuing disgorgement against securities law violators. In reaching this decision, the Court emphasized that disgorgement is a traditional equitable remedy, the purpose of which is compensate for the violation of a legally protected interest, regardless of losses suffered.

Within the context of securities law, disgorgement is the primary enforcement tool utilized by the Securities and Exchange Commission (SEC) to recoup unlawfully acquired gains from securities law violators. The purpose of disgorgement is to prevent unjust enrichment and deter others from engaging in violative conduct, rather than a punitive measure aimed at punishing violators of securities regulations. Leading up to the Court’s decision in Stripetch, federal statutes and caselaw served as the primary source of authority for the SEC’s use of disgorgement. Under 15 U.S.C. § 78u(d)(5), the SEC may obtain “any equitable relief that may be appropriate or necessary for the benefit of investors.” The Supreme Court has interpreted this statute as permitting the SEC to obtain disgorgement in civil enforcement as an equitable remedy awarded for victims. Liu v. SEC, 591 U.S. 71 (2020). Following Liu, 15 U. S. C. § 78u(d)(7) was enacted by Congress to expressly authorize the SEC to obtain disgorgement in enforcement actions.

The Petitioner in Sripetch was subject to a SEC civil enforcement action based on six counts of securities fraud and one count of selling unregistered securities. Although an entry of judgment and order of disgorgement was initially entered by mutual consent of the parties, the Petitioner subsequently objected to SEC’s intent to seek disgorgement for an amount exceeding $4.1 million dollars. The Petitioner argued that disgorgement was improper because the SEC failed to show that his wrongdoings resulted in pecuniary losses to investors. According to the Petitioner, investors could not qualify as ‘victims’ in the absence of demonstrable pecuniary losses sustained by his fraudulent schemes. The Ninth Circuit Court of Appeals rejected Petitioner’s argument in holding that evidence of pecuniary harm suffered by investors is not a pre-requisite to disgorgement nor is an essential element to qualify as ‘victim.’ Sripetch, 146 S. Ct. at 1408.

The narrow issue before the Supreme Court was whether the SEC must demonstrate that an investor suffered a pecuniary loss before it may secure a disgorgement remedy under statutory authority. At the onset, the Supreme Court classified disgorgement as an equitable remedy subject to “traditional equitable rules, including the rule that disgorgement must be awarded for victims.” Id. at 1410. Next, the Court noted that remedies in equity are intended to cure violations of legally protected interests, which is measured by “the defendant’s gain attributable to his wrongdoing,” rather than losses suffered by the plaintiff. Id. Under this premise, the Court reasoned that a defendant “can unjustly enrich himself even without leaving a plaintiff worse off financially.” Id. at 1412. Based on the determination that disgorgement constitutes an equitable remedy and an interpretation that traditional principles of equity do not require a showing of pecuniary loss to recover an award of unjust enrichment, the Supreme Court expressly held that evidence of an investor’s pecuniary loss is not a pre-requisite to an enforcement action seeking disgorgement brought by the SEC. Id. at 1410.

The Supreme Court’s opinion undoubtedly strengthens the SEC’s power to seek disgorgement, regardless of calculable financial harm suffered by investors. As new issues continue to arise within the realm of securities regulation and enforcement, the future of disgorgement will largely depend on whether the mechanism itself will continue to be classified as a remedy in equity rather than a legal remedy.