ONGKARUCK SRIPETCH v. SECURITIES AND EXCHANGE COMMISSION (SEC), Oral Arguments - SCOTUS
SCOTUSblog
Issue
Whether the SEC may seek equitable disgorgement under 15 U.S.C. 78u(d)(5) and (d)(7) without showing investors suffered pecuniary harm.
See full timeline: https://www.scotusblog.com/cases/sripetch-v-securities-and-exchange-commission/
Read full oral argument:
Court to contemplate SEC’s use of disgorgement in securities enforcement
Next week’s argument in Sripetch v SEC presents yet another chapter in the court’s sustained examination of the Securities and Exchange Commission’s use of certain remedies in its enforcement of the securities laws. The specific question here is whether the SEC can use “disgorgement” to force a wrongdoer to turn over its profits to the government without showing directly that the wrongdoer’s activities harmed its customers.
In this case, Ongkaruck Sripetch pleaded guilty to selling unregistered securities, activity for which he was sentenced to 21 months’ imprisonment. In a separate civil enforcement action, the SEC sought to force him to disgorge more than $6 million in profits from those transactions. Crucially, in affirming that award, the court of appeals declined to consider whether the SEC could prove that Sripetch’s activity caused “pecuniary harm” to his customers – something other courts of appeals have required when imposing such a remedy.
Justices seem receptive to SEC’s use of disgorgement in securities enforcement
Yesterday’s argument in Sripetch v SEC suggested something that has not happened in a lot of the court’s recent cases – a Supreme Court decision rejecting a challenge to the Securities and Exchange Commission’s exercise of its remedial powers. The specific question here is whether the SEC can use “disgorgement” to force a wrongdoer to turn over its profits to the government without showing harm caused to the wrongdoer’s customers, and most if not all of the justices seem just fine with that understanding of disgorgement.
The facts of the case illustrate the issue well. Ongkaruck Sripetch pleaded guilty to selling unregistered securities, for which he was sentenced to 21 months’ imprisonment. It is difficult to know exactly how much the securities violations cost his customers, which depends on whether they would have bought the stocks if he had complied with securities laws and how much profit or loss they made on them. But the SEC could prove that he made $6 million in profits from the unlawful transactions, and on that basis the lower courts obligated Sripetch to pay $6 million to the SEC under a recently enacted statute authoring the SEC to seek “disgorgement” from wrongdoers.