The question
Whether the SEC must show that a defendant's fraud caused pecuniary loss to investors before it may obtain a disgorgement award.
Sripetch v. SEC
What the Court decided
Affirmed. The SEC does not have to prove that investors suffered any financial loss before it may obtain disgorgement of a defendant's wrongful gains. Under traditional equitable principles, a remedy that deprives a wrongdoer of net profits from unlawful activity does not require the claimant to show a corresponding loss, so Liu v. SEC does not impose a pecuniary-loss requirement. Sripetch consented to judgment, and the SEC could seek more than $4.1 million in disgorgement without evidence that his penny-stock schemes caused investor losses.
How the justices split
UnanimousThe Court's opinion
Gorsuch, joined by Roberts, Thomas, Alito, Sotomayor, Kagan, Kavanaugh, Barrett, Jackson
Writing for a unanimous Court, held that the SEC need not show pecuniary loss to investors before obtaining disgorgement. The Court declined to decide how Section 78u(d)(7) affects the scope of the SEC's disgorgement power, and assumed disgorgement remains an equitable remedy bound by traditional equitable rules. Under those principles a party seeking to deprive a wrongdoer of net profits need not prove any corresponding loss, because the remedy takes the defendant's wrongful gain rather than compensating a financial loss. The Court rejected the argument that Liu v. SEC established a pecuniary-loss requirement.
Concurring
Thomas, writing alone
Filed a concurring opinion. The syllabus notes the concurrence but does not state its reasoning.
How we know · 5 sourced claims
The SEC brought a civil enforcement action against Sripetch charging six counts of securities fraud and one count of selling unregistered securities.
Source: syllabus, Held
Sripetch consented to entry of judgment and agreed that the court could order disgorgement, then objected when the SEC sought over $4.1 million.
Source: syllabus, Held
The Ninth Circuit rejected Sripetch's argument, deepening a split among the Courts of Appeals.
Source: syllabus, Held
The Court held that a showing of pecuniary loss to investors is not required before the SEC may obtain disgorgement.
Source: syllabus, Held
Gorsuch delivered the opinion for a unanimous Court, and Thomas filed a concurring opinion.
Source: syllabus, lineup