Supreme Court Upholds SEC Authority to Obtain Disgorgement Without Actual Loss But Leaves Important Questions Unanswered
On June 4, 2026, the U.S. Supreme Court issued its highly anticipated ruling in Sripetch v. Securities and Exchange Commission, upholding the SEC’s ability to obtain disgorgement of ill-gotten gains without first proving that investors actually suffered financial losses. The ruling is a clear win for the SEC, as it allows the Commission to use disgorgement to recover profits from an unlawful securities scheme even when investors’ losses are hard to measure or wholly absent.
Sripetch likely will not be the last word on the scope of the disgorgement remedy in SEC enforcement actions. The Court ruled for the SEC on a narrow ground, assuming—without deciding—that disgorgement as commonly sought by the SEC remains an equitable remedy subject to traditional equitable principles. It then held that those principles do not require proof of a victim’s pecuniary loss. But the Court left open the more fundamental question of whether disgorgement in SEC enforcement actions functions as an equitable remedy to be awarded by a court alone, or instead is better characterized as legal remedy subject to the Seventh Amendment’s jury-trial right.
Background
The remedies available to the SEC have changed markedly over the last century. As originally enacted in 1934, the Securities Exchange Act did not expressly authorize the SEC to seek monetary awards for securities-law violations. Nor did other provisions of the federal securities laws. For the early decades of the SEC’s existence, the remedy in enforcement actions was therefore limited to an injunction against future violations. Beginning in the 1970s, however, lower courts allowed the SEC to seek “disgorgement” of unlawful gains as an exercise of courts’ inherent equitable powers. These disgorgement payments often exceeded a defendant’s net profits and were frequently paid to the United States Treasury rather than to investors.
In 2002, Congress amended the Exchange Act to authorize the SEC to seek “any equitable relief that may be appropriate or necessary for the benefit of investors” under 15 U.S.C. § 78u(d)(5). That provision did not use the word “disgorgement,” but the SEC relied on it as authority to continue pursuing that remedy.
The Supreme Court largely accepted the SEC’s position in Liu v. Securities and Exchange Commission, 591 U.S. 71 (2020). In Liu, the Court held that § 78u(d)(5)’s authorization of “equitable relief” allowed the SEC to seek disgorgement, but only if the remedy stayed within the limits of traditional equitable principles. As relevant here, the Court held that those traditional equitable principles required that (i) the value of the disgorged sum be limited to the defendant’s net profits; and (ii) when feasible, the disgorged sum be returned to investors rather than paid to the Treasury. Liu thus allowed the SEC to continue to seek equitable disgorgement, but it insisted that equity’s limits came with its label.
Following Liu, Congress amended the Exchange Act again, this time expressly adding “disgorgement” as a remedy for SEC enforcement actions in 15 U.S.C. § 78u(d)(7), in addition to the separate authorization for “equitable relief” in § 78u(d)(5). Thus, disgorgement now sits alongside, and separate from, the Exchange Act’s authorization for “equitable relief” in § 78u(d)(5).
Sripetch
In 2020, the SEC brought a civil enforcement action against Ongkaruck Sripetch, alleging numerous pump-and-dump schemes involving several penny-stock companies. Sripetch objected to the SEC’s request for $4.1 million in disgorgement, arguing that because Liu permitted disgorgement only for “victims,” investors could not qualify as victims unless the SEC proved they had suffered financial losses. The SEC had two primary responses before the Supreme Court. First, it argued that 15 U.S.C. § 78u(d)(7) created a new statutory disgorgement remedy that was freed, at least in part, from traditional equitable limits. Second, it argued that even if disgorgement under § 78u(d)(7) remained equitable, traditional equity did not require proof that investors lost money.
The Supreme Court chose the second, narrower path, assuming—without deciding—that “disgorgement under § 78u(d)(7) remains an equitable remedy” subject to traditional equitable principles. Based on that assumption, the Court held that the SEC did not need to prove investor loss because, “under traditional equitable principles, a victim seeking disgorgement of a defendant’s unlawful gains does not need to prove he has ‘suffered a corresponding loss or,’ indeed, ‘any loss.’” In support of this holding, the Court cited a line of equity decisions dating back more than a century equity ordering disgorgement of profits obtained from invasion of a legally-protected interest, even where the party whose interest was invaded suffered no pecuniary loss. For example, the Court cited a 1936 decision of the Supreme Court of Kentucky in which an individual who opened a tourist attraction featuring a cave that was partially under a neighbor’s property was ordered to pay a portion of his profits to the neighbor, even though the cave itself was inaccessible from the neighbor’s property and he thus suffered no financial loss from its use as a tourist attraction.
The Court’s opinion left open several interesting questions that may provide opportunities to companies facing a proposed disgorgement remedy from the SEC.
Question 1: Do Liu’s Equitable Constraints Still Apply to Disgorgement Under § 78u(d)(7)?
Because the Court assumed without deciding that disgorgement under § 78(d)(7) remains an equitable remedy, it expressly did not resolve the question of whether the Liu constraints (that the value of the disgorged sum be limited to the defendant’s net profits and must, where feasible, be returned to investors) apply to this remedy. The Court observed that if the government seeks to depart from these principles by using § 78u(d)(7) as a tool to resume its efforts to seek penalties for the Treasury, rather than compensation for victims, “it would of course proceed beyond what Liu held § 78u(d)(5) tolerates.” The Court found that such a development “would raise questions about whether and to what degree § 78u(d)(7) permits deviation from equitable principles”—but did not provide any indication of what the answer to those questions would be.
A defendant facing such a development may argue that such an attempted use of “disgorgement” is an awkward fit with traditional equity. Equitable restitution generally required the plaintiff to identify specific property or trace particular funds in the defendant’s hands. An accounting for profits typically rested on a fiduciary, trust-like, or property-based relationship. Disgorgement under § 78u(d)(7) that does not comply with the Liu constraints would have none of those features. The SEC is not the investor whose money was taken. It has no preexisting ownership interest in the defendant’s funds. And, under this scenario, it would be seeking a money judgment measured by the defendant’s overall gains, with the money perhaps ending up in the federal fisc rather than in investors’ pockets.
Such a defendant would likely have to admit that Congress can expand the remedies available to the SEC and has expressly authorized the SEC to pursue “disgorgement” in its amendments to the Exchange Act. But calling the remedy provided in § 78u(d)(7) “disgorgement” does not necessarily make it an equitable remedy, particularly if used in a manner inconsistent with traditional principles of equity. If the Commission seeks to retain recovered funds rather than returning them to investors, the remedy looks less like restitution and more like forfeiture or a civil penalty.
Such a defendant would also likely argue that legislative history and the development of the 78u(d)(7) remedy support the position that such sanction it is no longer equitable in nature. Equity supplied relief where the law furnished none. Once § 78u(d)(7) supplied a statutory path to disgorgement, there was no need for equity to fill the gap. The statutory structure makes the point harder to avoid. The Exchange Act now authorizes “disgorgement” under § 78u(d)(7), in addition to § 78u(d)(5)’s existing authorization for equitable relief. Ordinary principles of statutory interpretation counsel that Congress meant those provisions to do different work. Otherwise, disgorgement under § 78u(d)(7) would be equitable relief by another name, and the new disgorgement provision would have little independent office.
Question 2: Does a Defendant Have a Right to a Jury Trial If The SEC Seeks 78u(d)(7) Disgorgement?
Why would a defendant go to such pains to argue that the use of 78u(d)(5) outside of Liu’s constraints does not constitute an equitable remedy? If statutory disgorgement is a legal remedy, the Seventh Amendment right to a jury trial follows. In Securities and Exchange Commission v. Jarkesy, 603 U.S. 109 (2024), the Supreme Court held that when the SEC seeks civil penalties, defendants are entitled to a jury trial. The same reasoning may extend to SEC disgorgement under § 78u(d)(7) if such disgorgement is understood as a forfeiture or a penalty-like monetary remedy.
In recent years, the Court has shown renewed interest in the jury’s role when the government seeks money from a defendant on facts found by a judge. Justice Thomas’s concurrence in Sripetch makes that concern explicit. In his view, disgorgement under § 78u(d)(7) is a legal money remedy, which means the facts necessary to support the award must be found by a jury rather than by a judge sitting in equity. Recent opinions in cases involving the role of the jury in determining restitution awards reflect a similar constitutional concern. In their dissent from denial of certiorari in Hester v. United States, 586 U.S. 1104 (2019), for example, Justices Gorsuch and Sotomayor urged the Court to take up whether the Constitution requires juries, rather than judges, to find the facts necessary to impose restitution. More recently, in Ellingburg v. United States, 607 U.S. 163 (2026), the Court held that the Mandatory Victims Restitution Act imposes a “criminal punishment,” clearing at least one doctrinal hurdle to putting factfinding underlying restitution awards before a jury.
These decisions, read alongside Jarkesy, they suggest that the Court may be willing to once again revisit the jury’s historic role when the SEC seeks money judgments resembling penalties, regardless of whether it characterizes such penalties as disgorgement.
Conclusion
Sripetch gives the SEC an important immediate victory. But it does not settle whether disgorgement under the Exchange Act can continue as business as usual after Congress transformed it from an implied equitable remedy into an express statutory one. That unresolved question may frame the next major challenge to the SEC’s attempt to seek §78u(d)(7) disgorgement.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.
