U.S. Supreme Court

Can the SEC order disgorgement in civil enforcement cases? Supreme Court agrees to decide

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The U.S. Supreme Court has agreed to decide whether the Securities and Exchange Commission is authorized to seek disgorgement in civil enforcement cases.

The Supreme Court granted cert on Friday in the case of Charles Liu and Xin Wang, who were ordered to disgorge $26.7 million they collected for a cancer-treatment center that was never built, report SCOTUSblog, Bloomberg News and Law360.

Liu and Wang had collected the money from 50 Chinese immigrants hoping to take advantage of a federal program that offers visas to immigrants who invest in U.S. businesses.

The cert petition argues disgorgement is not an equitable remedy that is authorized by the federal law governing the SEC. The petition cites the Supreme Court’s 2017 decision Kokesh v. SEC, which identified disgorgement as a penalty subject to a five-year statute of limitations.

A footnote in Kokesh said the court wasn’t taking a position on whether courts have authority to order disgorgement in SEC enforcement proceedings. During oral arguments in Kokesh, five justices questioned the SEC’s authority to seek disgorgement, according to the Law360 story.

The petition says the SEC routinely seeks disgorgement, collecting “billions more dollars than the amounts Congress authorized.” In 2018 alone, the SEC collected $2.51 billion through disgorgement, the brief says.

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