Jun 42026

Supreme Court Rules for SEC on Disgorgement Awards

White Collar Watch
, , , ,

In a win for the U.S. Securities and Exchange Commission (“SEC”), the U.S. Supreme Court ruled today in Sripetch v. SEC, No. 25-466 (June 4, 2026) that an SEC disgorgement award does not require proof of pecuniary loss by investors. The case involved the new statutory disgorgement remedy (in Exchange Act Section 21(d)(7)) that Congress added in 2021, following the Supreme Court’s decisions in Kokesh and Liu, which together curtailed the SEC’s disgorgement remedy by subjecting it to statutory time limits and equitable constraints.

The practical result is that the SEC will have a somewhat easier time obtaining disgorgement awards in future enforcement cases. But the Supreme Court’s decision explicitly left open a number of interesting questions: whether the equitable constraints identified in Liu apply to the new statutory disgorgement remedy (the Court assumed here that they do), whether disgorgement is available when it is infeasible to distribute funds to investors, and whether the Seventh Amendment jury trial right under Jarkesy is implicated by the disgorgement remedy. How the SEC pursues disgorgement awards going forward may implicate all those questions and lead to future litigation. We’ll be watching closely.

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.

White Collar Watch

You might also like
DOJ Signals Increasing Scrutiny of Vertically Integrated Healthcare Companies

On May 19, 2026, Nicole Sarrine, Deputy Assistant Attorney General (DAAG) for Civil Conduct in the U.S. Department of Justice (DOJ) Antitrust Division, signaled increasing suspicion of vertically integrated companies in the healthcare sector in remarks delivered at the Transparency Rising 2026 National Forum.[1]

CFTC Division of Enforcement Issues New Cooperation Policy

The CFTC’s Division of Enforcement has issued a significant new policy on cooperation that reshapes how self-reporting, cooperation, and remediation will affect enforcement outcomes. The May 19, 2026 Staff Advisory replaces prior guidance and, for the first time, creates a defined framework for when the Division may decline to recommend an enforcement action altogether.

The policy establishes detailed criteria for declinations, including prompt voluntary self-reporting, full cooperation, timely remediation, and restitution or disgorgement, while also introducing structured penalty reduction tiers of up to 75% for parties that cooperate even if they do not qualify for a declination. At the same time, the guidance raises the stakes on timing, requiring parties to report misconduct “at the earliest possible opportunity.”

The new internal guidance provides important insight into how the Division intends to exercise prosecutorial discretion and will have significant implications for firms evaluating potential misconduct, internal investigations, and disclosure decisions. Read the full Sidley post for a detailed analysis of the policy’s requirements, cooperation credit framework, and practical considerations for market participants. The CFTC press release can be found here.

DOJ Announces Accelerated Review of FCA Qui Tams Alleging Fraud Against State-Administered Benefits Programs

It is not business as usual at DOJ.  In the latest announcement related to the Department’s efforts to fight alleged fraud, on May 27, 2026, Assistant Attorney General Brett Shumate issued a memorandum directing DOJ’s Civil Division and U.S. Attorneys’ Offices to accelerate the review of qui tams alleging fraud against federally funded state-administered benefits programs, including programs involving housing, food assistance, medical care, and cash assistance.   The memorandum, titled “Accelerating Review and Enhancing Enforcement in Benefits Fraud Matters,” implements President Trump’s March 2026 Executive Order establishing the “Task Force to Eliminate Fraud,” which we reported on here, and which directed the Department to take appropriate action to promote “meritorious” qui tams and to complete investigations sooner, including within the 60-day statutory period.

As with other recent announcements on FCA enforcement, including related to the FOCUS Initiative, this latest move reflects both DOJ’s increasing emphasis on whistleblower-driven FCA enforcement as well as its commitment to preserve its own resources, including through the exercise of its statutory right to dismiss qui tams in appropriate circumstances.  It is also consistent with the Administration’s recent focus on increasing enforcement against fraud directed at certain federally-funded state benefit programs, as we reported here.

Faster Qui Tam Vetting; More Relator-Led Litigation

The memorandum directs DOJ attorneys to complete review of new benefits fraud qui tam complaints “to the maximum extent practicable” within the FCA’s initial 60-day seal period and no later than 120 days. After that review, DOJ is instructed either to:

  1. permit the relator to proceed with the action;
  2. continue investigating the allegations; or
  3. seek dismissal of complaints “because the allegations lack adequate specificity or are legally deficient.”

DOJ acknowledges that the policy “will increase the number of benefits fraud matters primarily litigated by relators.” Cases that fall into this bucket include those where:

  • the alleged conduct clearly states an FCA violation;
  • the allegations are corroborated by agency information, data analytics, or insider knowledge;
  • the scheme is not novel or complex;
  • potential damages are below $10 million; and
  • aggravating circumstances exist, such as beneficiary harm, concealment, or ongoing misuse of federal funds.

Relators and their counsel will be expected to litigate these cases with minimal burden on the government, while DOJ will continue exercising oversight authority throughout the litigation.

DOJ also states that this process is intended to conserve government resources by allowing relators to litigate less complex matters while DOJ focuses on “the largest, most complex, and harmful fraud schemes,” which will largely fall within the “needs more investigation” bucket.  This division of labor is perhaps slightly in tension with statements made by Assistant Attorney General Colin McDonald, who, during his swearing-in ceremony to lead the new National Fraud Detection Center, stated: “No longer will [DOJ] be uninterested in low levels of fraud; we will be interested in all of it.”

While the Department’s commitment to expediting the vetting of qui tams is laudable, it represents a seismic shift and remains to be seen whether Civil Frauds and the U.S. Attorney’s Offices have the resources and bandwidth to make good on the promise, or whether the lion’s share of the cases simply default to further investigation.

Expedited Investigation Procedures

For matters DOJ elects to investigate further, the memorandum establishes an accelerated investigative framework built around a presumptive 120-day investigative period.

Among other things, DOJ attorneys are instructed to:

  • issue subpoenas and CIDs promptly;
  • conduct early witness interviews;
  • use targeted information requests;
  • enforce CID deadlines aggressively, including by moving in court if necessary; and
  • consider relying on relators’ counsel to assist investigations.

The memorandum further encourages DOJ attorneys to make intervention decisions before damages analyses are fully developed where liability evidence is sufficiently strong, and to pursue the evidence of damages during discovery.

Coordinated Civil, Criminal, and Administrative Enforcement

Notably, the language in DOJ’s memo and release announcing this accelerated review of qui tams signals that close coordination will be occurring to ensure that a “whole of government” approach will be used, placing all (i.e., administrative, civil, and criminal) enforcement options on the table.

New matters are to be referred promptly to DOJ’s Criminal Division and National Fraud Enforcement Division (NFED) for evaluation of potential criminal exposure.

Affected agencies also will evaluate possible administrative remedies, including payment suspensions, while DOJ intends to rely increasingly on agency data analytics and program information to corroborate whistleblower allegations.

Key Takeaways

The memorandum reflects several broader trends in DOJ FCA enforcement.

First, DOJ continues to emphasize speed in FCA investigations and intervention decisions, particularly in areas identified as Administration priorities. The memorandum’s rigid timelines may create significant pressure on defendants early in investigations.

Second, the memorandum signals DOJ’s willingness to rely more heavily on relators and private counsel to litigate FCA cases involving less complex benefits fraud allegations. That approach may increase the volume of FCA litigation in areas involving Medicaid, housing assistance, food assistance, and other state-administered benefits programs.

Third, the memorandum reinforces DOJ’s increasing use of coordinated enforcement mechanisms across civil, criminal, and administrative channels. Defendants facing benefits fraud allegations may therefore encounter simultaneous exposure to FCA damages and penalties, criminal investigation, payment suspensions, and agency enforcement actions.  This news, combined with the advent of anticipated increased resourcing and personnel for NFED, means that we should potentially expect an uptick in criminal investigations and case openings based on referrals, regardless of whether such referrals ultimately yield charges.

Finally, the memorandum underscores DOJ’s continued emphasis on data analytics and interagency coordination in identifying and developing FCA matters. Organizations participating in federally funded benefits programs should expect heightened scrutiny of billing practices, eligibility determinations, certifications, and program compliance controls.