Supreme Court Upholds SEC’s Broad Disgorgement Powers 

No harm, no foul? Not quite. 

The Supreme Court ruled unanimously last week in favor of the Securities and Exchange Commission in a case testing whether the regulator must prove investors suffered quantifiable financial losses in order to force disgorgement of allegedly ill-gotten gains. It doesn’t have to. 

The decision in Sripetch v. Securities and Exchange Commission preserved disgorgement as one of the SEC’s most potent enforcement weapons, according to Jose Lopez, a partner at Dorsey Whitney. Notably, however, the ruling did not directly address broader questions about the appropriate use of disgorgement, which is traditionally seen as a means of returning assets to wronged investors, versus the assessment of penalties, which are paid to the government to deter future wrongdoing. Securities lawyers can dispute the amount and nature of disgorgement in cases where there’s some ambiguity about who was harmed, arguing that any request for disgorgement is really a penalty in disguise, but they will need to do so under a framework that remains favorable to the SEC.

“The unanimous decision, which is rare these days, sends a clear message that the core pillar of the SEC’s mission of protecting the investing public is not a partisan issue,” Lopez told Advisor Upside.

SCOTUS Backs SEC

At the heart of the ruling is an SEC civil enforcement action alleging Ongkaruck Sripetch engaged in fraudulent pump-and-dump schemes involving penny stocks. Sripetch, who first consented to judgment and agreed that the district court overseeing the case could order disgorgement, subsequently objected when the SEC sought more than $4.1 million. He argued that disgorgement was unavailable absent proof that specific investors suffered quantifiable financial injuries that can be calculated and compensated with money. 

The district court ultimately awarded disgorgement and the Ninth Circuit later affirmed, ruling that the SEC need not prove pecuniary harm to obtain disgorgement. Upon appeal to the Supreme Court, the justices reasoned that “traditional equitable principles” allow a wrongdoer’s unlawful profits to be stripped even when victims cannot show specific corresponding financial losses. That’s a big deal, according to Lewis and others, especially in the wake of other recent cases that have constrained the SEC’s enforcement powers. 

Overall, disgorgement remains a key enforcement tool for the SEC:

• In 2025, the agency obtained orders for monetary relief of $10.8 billion in disgorgement and prejudgment interest. 
• An additional $7.2 billion in civil penalties was also assessed.

Not Categorical. It’s notable that the court declined to impose a categorical monetary loss requirement, according to an analysis by attorneys at Sullivan and Cromwell. That means practitioners should not assume that conduct appearing “victimless” will avoid disgorgement exposure, particularly where the SEC can show ill-gotten gains and identify investors whose legally protected interests were violated.