Supreme Court Rejects Financial Harm Requirement for SEC Disgorgement

On June 4, 2026, the U.S. Supreme Court rejected an attempt to limit the ability of the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) to seek disgorgement, ruling that the remedy does not require evidence of financial harm to investors.¹ This ruling is a significant win for the SEC, following decisions in recent years that have curtailed the Commission’s enforcement and remedial powers.

The case stems from an alleged “pump and dump” scheme operated by the Plaintiff, Ongkaruck Sripetch, in which he and his co-conspirators obtained shares of various penny stocks, promoted the companies to the market to raise the share price before promptly selling at a profit. The SEC brought an enforcement action against Mr. Sripetch for six counts of securities fraud and one count of selling unregistered securities. Mr. Sripetch consented to the entry of judgment against him and agreed that the court could enter disgorgement, but when the Commission sought entry of disgorgement to the tune of $4.1 million, Mr. Sripetch objected arguing that the SEC lacked evidence that the victims of his alleged schemes suffered any pecuniary losses. The U.S. District Court for the Southern District of California ruled in favor of the Commission, finding that the SEC had established that Mr. Sripetch’s investors suffered a financial loss.² The U.S. Court of Appeals for the Ninth Circuit, however, took a different approach, ruling that evidence of financial harm is not required to justify a disgorgement order.³ The Ninth Circuit’s decision widened an existing circuit court split, with the First Circuit concurring on the issue but the Second Circuit taking the opposite view.

Supreme Court Resolves a Circuit Split

In considering the question, the Supreme Court’s unanimous opinion — authored by Justice Neil Gorsuch — walked through the history and nature of disgorgement as a remedy for violations of federal securities laws. Until 2021, nothing in statutory law expressly authorized the Commission to seek and receive disgorgement. Instead, the disgorgement remedy emerged in the 1970s with the SEC arguing that disgorgement fell within the courts’ “inherent equity power to grant relief.”⁴ In a pair of decisions in 2017 and 2020, the Supreme Court reigned in the SEC’s authority to obtain disgorgement — first by imposing a firm statute of limitations in Kokesh,⁵ and then by limiting the scope of disgorgement authorized under amendments to the Securities Exchange Act of 1934 (“Exchange Act”) permitting the SEC to seek equitable relief.

In Liu v. SEC, the Court specifically considered whether courts possess the authority to order disgorgement under the Exchange Act provision that the SEC can seek “any equitable relief that may be appropriate or necessary for the benefit of investors.”⁶ The Court held that disgorgement falls within the scope of available equitable remedies, elaborating that it is therefore subject to the limitations of equitable remedies: namely, that the amount of disgorgement must be limited to a defendant’s net profits, and that disgorgement must be awarded for the defendant’s victims (rather than as a penalty going to the U.S. Treasury). Six months after Liu, Congress explicitly codified the SEC’s authority to seek disgorgement as an enforcement tool in Section 16(d)(7) of the Exchange Act, 15 U.S.C. §78u(d)(7).

While the Sripetch parties debated whether Liu’s equitable limitations still apply following Congress’s statutory amendments to the SEC’s authority, the Court ruled that issue irrelevant to the case. Citing authorities dating back to 1910, Justice Gorsuch reasoned that equitable remedies have often been applied to “deprive wrongdoers of their net profits from lawful activity” regardless of whether the victim was made financially worse off by the defendant’s conduct. As long as victims have suffered an infringement upon their legal rights, disgorgement can be ordered to deprive a defendant of its ill-gotten gains.

Justice Clarence Thomas, concurring, encouraged future litigation, arguing that the Court should recognize that, with Congress’ statutory amendments in 2021, disgorgement is now a legal remedy subject to the Seventh Amendment’s right to a jury trial.

Takeaways from Sripetch v. SEC

This decision puts the brakes on recent decisions that have supported challenges to the SEC’s exercise of its remedial powers, holding that the SEC can obtain disgorgement of a defendant’s net profits without establishing actual pecuniary harm to investors. Even so, this is unlikely to be the final word on the SEC’s authority to obtain disgorgement. Justice Thomas’ concurrence urged the Court to reconsider the nature of disgorgement as a remedy — a viewpoint that Justice Gorsuch appeared to support during oral arguments. We can expect more litigation regarding the extent and bounds of disgorgement as an enforcement remedy in the future.

¹See Sripetch v. SEC, No. 25-466, 608 U.S. ___ (2026).

²SEC v. Sripetch, No. 3:20-cv-01864, 2024 WL 154917 (S.D. Cal. Apr. 8, 2024).

³SEC v. Sripetch, 154 F.4th 980 (9th Cir. 2025).

⁴See SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (S.D.N.Y. 1970).

⁵Kokesh v. SEC, 581 U. S. 455, 458 (2017).

⁶Liu v. SEC, 591 U.S. 71, 75 (2020).

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.