The U.S. Supreme Court will consider how much power the SEC has to recover illegal profits in a case that could blunt one of the agency’s most potent enforcement tools.
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The justices said Friday they will decide whether the Securities and Exchange Commission must show identifiable investor harm in order to win “disgorgement” from people and firms found to have engaged in securities fraud.
The case concerns what has long been one of the Wall Street watchdog’s favorite legal remedies. The commission secured orders for more than $6 billion in disgorgement and related interest in fiscal 2024, almost three-quarters of the commission’s total financial penalties.
The number dropped to a record low of $108 million in fiscal 2025, according to Cornerstone Research. Paul Atkins, the SEC chairman appointed last year by President Donald Trump, has long spoken out against hefty corporate penalties. The agency has not published its own tally of 2025 enforcement actions.
Disgorgement is a longstanding legal remedy used to return wrongful gains to the victims. It’s distinct from SEC fines, which the agency is allowed to use as punishment.
The justices will hear an appeal from Ongkaruck Sripetch, who was accused by the SEC of engaging in a variety of fraudulent schemes involving at least 20 penny-stock companies. The SEC said that in one “pump and dump” scheme, Sripetch bought shares of a company, used a third party to promote the stock and then sold it after the price rose.
Sripetch consented to a judgment against him while continuing to fight over the disgorgement award. A federal district judge then ordered Sripetch to give up $3.3 million in profits and interest, and the 9th U.S. Circuit Court of Appeals affirmed the decision.
The Supreme Court in 2020 upheld the SEC’s disgorgement authority while narrowing its reach. The 8-1 decision said disgorgement awards are permissible if they don’t exceed the wrongdoer’s net profits and are “awarded to victims.”
Sripetch says the 2020 ruling underscores that disgorgement can be used only when the SEC can show the kind of quantifiable harm that would allow for compensation.
The ruling “limited equitable disgorgement to compensating victims,” his lawyers argued in their appeal. “Otherwise, the court explained, wrongdoers would be ‘punished by paying more than a fair compensation to the person wronged.'”
Federal appeals courts disagree on the issue. Although the 9th Circuit in Sripetch’s case said the SEC didn’t have to show what is known as “pecuniary harm,” the New York-based 2nd Circuit has said that such a demonstration is a requirement.
Although the SEC under Trump has used disgorgement sparingly, U.S. Solicitor General D. John Sauer is urging the Supreme Court to bolster the commission’s power and not require proof of pecuniary harm.
“Disgorgement is a ‘profits-focused remedy’ that rests on the principle that a wrongdoer should not ‘make a profit out of his own wrong,'” argued Sauer. “The availability of disgorgement therefore turns on whether the violator has made a profit, not on whether the victim has suffered a loss.”
The administration joined Sripetch in asking the high court to intervene and clear up the lower-court disagreement.
Sripetch has separately pleaded guilty to one count of selling unregistered securities and was sentenced to 21 months in prison.
The court will hear arguments, probably in April, and issue a ruling by July.
