United States: Disgorgement Debate: Supreme Court to Hear Sripetch v. SEC
By: Hayley Trahan-Liptak, Christopher F. Warner, and Bridget K. McKelvey
The Supreme Court will soon once again weigh in on the US Securities and Exchange Commission’s (SEC) enforcement powers, this time addressing whether disgorgement is available without showing that victims suffered pecuniary harm. Last week, the Supreme Court agreed to hear SEC vs. Sripetch, et al., a Ninth Circuit decision affirming a disgorgement award despite the SEC’s failure to demonstrate defrauded investors suffered pecuniary harm.1
The Supreme Court limited the SEC’s ability to claim disgorgement in the 2020 decision in Liu v. SEC, finding that disgorgement can be equitable relief if it is confined to the wrongdoer’s illicit net profits and is returned to victims.2 Following Liu, Courts split on pecuniary harm was needed to support a disgorgement award.3 For example, in SEC v. Govil, the Second Circuit concluded a showing of pecuniary harm was required given disgorgement’s equitable limitation that it be “awarded for victims.”4 In reaching the exact opposite conclusion, the First Circuit in SEC v. Navellier & Associates, Inc. held that disgorgement does not require a showing of pecuniary harm so long as disgorgement was “tethered to a wrongdoer’s net unlawful profits.”5 If that threshold is met, courts need not be concerned with a victim’s harm.6
The Court’s resolution in this matter will have wide implications for SEC enforcement, specifically the monetary penalties the SEC may seek both in negotiations and in litigation. If the Court finds pecuniary harm is required, it will further restrict the SEC’s powers.
1 SEC v. Sripetch, et al., 154 F.4th 980 (9th Cir. 2025); Jessica Corso, BREAKING: Justices to Resolve the Split on SEC Disgorgement Powers (Jan. 9, 2026), available here.
2 Navellier, 108 F.4th at 41; Govil, 86 F.4th at 98; see also Neil T. Smith, Liu v. SEC: The Supreme Court Limits the SEC’s Disgorgement Power and Sets the State for Future Legal Battles (June 24, 2020), available here (discussing Liu).
3 See e.g., SEC v. Navellier & Associates, Inc., 108 F.4th 19 (1st Cir. 2024); SEC v. Govil, 86 F.4th 89 (2d Cir. 2023); see also SEC v. Hallam, 42 F.4th 316, 341 (5th Cir. 2022) (holding disgorgement is authorized as a legal remedy, not only equitable, therefore SEC need not show investors suffered pecuniary harm).
4 86 F.4th at 98 (emphasis added).
5 108 F.4th at 41 (emphasis in the original).
6 Id.