(Bloomberg) -- The U.S. Supreme Court agreed to consider stripping the Securities and Exchange Commission of its power to recoup illegal profits from wrongdoers, taking up a challenge to one of the agency’s most potent legal weapons.The appeal by Charles Liu and Xin Wang contends that “disgorgement”
-- The U.S. Supreme Court agreed to consider stripping the Securities and Exchange Commission of its power to recoup illegal profits from wrongdoers, taking up a challenge to one of the agency’s most potent legal weapons.
The SEC won disgorgement orders totaling $2.5 billion in fiscal 2018, compared with $1.4 billion in other types of penalties. The 2002 Sarbanes-Oxley Act says judges hearing SEC enforcement actions can award “any equitable relief” they deem appropriate for the protection of investors.But Liu and Wang’s attorneys say the SEC has sought so much money through disgorgement that it’s become a punitive measure, much like a penalty.
Liu and Wang point to a 2017 Supreme Court decision that said disgorgement is covered by a five-year statute of limitations that applies to penalties. That ruling explicitly declined to say whether the SEC has power to seek disgorgement in the first place.
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