On June 4, 2026, the Supreme Court issued its decision in Sripetch v. SEC, No. 25-466 (U.S. June 4, 2026), unanimously holding that the Securities and Exchange Commission (“SEC”) may obtain a disgorgement award without showing a pecuniary loss to investors, eliminating possible defenses to such awards in circumstances where investors are left no worse off financially.
Background: Liu v. SEC and the Subsequent Circuit Split
Since the 1970s, courts have awarded disgorgement as a remedy in SEC civil enforcement proceedings. Disgorgement is a restitutionary remedy that requires a defendant to give up (i.e., disgorge) the profits attributable to the violation of the securities laws. Courts have sourced their disgorgement authority to 15 U.S.C. § 78u(d)(5), which permits the SEC to obtain “equitable relief” in actions brought under the securities laws.
In Liu v. SEC, 591 U.S. 71 (2020), the Supreme Court ratified the long-standing practice of awarding disgorgement, finding that it qualified as “equitable relief” under section 78u(d)(5) and therefore was a permissible remedy in SEC civil enforcement actions. However, the Court raised concerns that courts had occasionally awarded disgorgement in ways that were at the outer bounds of their equity practice, including by depositing disgorged gains with the Treasury instead of returning them to victims. Consequently, the Court identified certain common-law limitations on disgorgement awards under section 78u(d)(5), including that courts must deduct legitimate expenses and that any funds recovered be “awarded for victims” (i.e., wronged investors).
The year after the Liu decision, Congress enacted 15 U.S.C. § 78u(d)(7), which expressly permitted the SEC to seek, and courts to order, disgorgement “of any unjust enrichment by the person who received such unjust enrichment as a result of” his securities-law violation. In the wake of the enactment of section 78u(d)(7), a circuit split arose out of Liu’s requirement that disgorged funds be “awarded for victims,” and whether that meant disgorgement could be awarded only upon a finding that investors suffered pecuniary harm. The First Circuit, in SEC v. Navellier & Associates, Inc., 108 F.4th 19 (1st Cir. 2024), concluded that no showing of pecuniary harm to investors is required to award disgorgement, but the Second Circuit, in SEC v. Govil, 86 F.4th 89 (2d Cir. 2023), held the opposite.
Facts and Proceedings Below
In Sripetch, the SEC brought a civil enforcement action against 15 defendants, including Ongkaruck Sripetch, alleging they had engaged in a host of fraudulent schemes.[1] Sripetch consented to the entry of judgment against him, but in response to the SEC’s motion for remedies, he argued that disgorgement could not be awarded because the SEC had failed to provide evidence of, or identify, any investors who suffered financial losses that could be “victims” for whom disgorgement could be awarded under Liu. The district court rejected the argument and awarded disgorgement, finding that the SEC’s allegations showed investor harm.
The Ninth Circuit affirmed, siding with the First Circuit in Navellier and holding that a disgorgement award does not require a showing that investors experienced pecuniary harm. The panel disagreed with the Second Circuit’s conclusion that “victim” is limited to a person who has suffered pecuniary harm, noting that, at common law, a party seeking disgorgement was not required to show any loss and instead only an actionable interference with the legally protected interests.
The Supreme Court granted review to consider whether the SEC may seek equitable disgorgement under 15 U.S.C. 78u(d)(5) and (d)(7) without showing investors suffered pecuniary harm.
The Supreme Court’s Decision
In a unanimous decision written by Justice Gorsuch, the Court held that no showing of pecuniary loss is required for an investor to be a “victim” such that the SEC may obtain disgorgement.
The Court assumed, without deciding, that the equitable constraints applicable to section 78u(d)(5) under Liu apply to section 78u(d)(7), and concluded that, under traditional equitable principles, a victim seeking disgorgement need not show any loss, only an interference with her protected interests. The Court contrasted damages and equitable remedies, noting that while the former are compensatory and measured by the victim’s loss, the latter are measured by the defendant’s gain attributable to his wrongdoing against the victim. Rejecting Sripetch’s argument that Liu limited disgorgement to restoration of the status quo, the Court emphasized that “in some instances, a defendant can unjustly enrich himself even without leaving a plaintiff worse off financially” and a court may return the defendant to his status quo by depriving him of his improper gains.
Justice Thomas filed a concurrence agreeing with the Court’s holding but asserting that disgorgement is a legal, not equitable, remedy, entitling defendants to a jury trial under the Seventh Amendment.
Implications
The Court’s decision makes clear that disgorgement may be awarded without a showing of pecuniary loss by investors, and forecloses any argument that, as a matter of law, disgorgement cannot be awarded where investors are not left financially worse off by securities law violations.
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[1] The alleged fraudulent schemes involved “scalping” various penny stock companies, in violation of the securities laws, and followed the same general pattern: (1) the defendants obtained shares of a microcap issuer through convertible debt agreements; (2) defendants would promote the issuer or hire third-party promoters to do so; (3) the promotions did not identify the defendants as the funder of the promotions, or identify that the funder was planning to sell stock in the issuers being promoted; and (4) following the promotions, liquidity of the issuer’s stock increased and the share price rose, and defendants promptly sold their holdings.
