Supreme Court Confirms SEC Can Obtain Disgorgement Without Proving Investor Loss

On June 4, 2026, in Sripetch v. SEC, the U.S. Supreme Court unanimously held that the SEC may obtain disgorgement of a defendant’s ill-gotten gains in a civil enforcement action without proving that investors suffered pecuniary loss. The decision resolves a circuit split between the First and Ninth Circuits (which did not require proof of pecuniary loss) and the Second Circuit (which did) that had arisen in the wake of the Court’s 2020 decision in Liu v. SEC, which imposed numerous equitable limitations on the SEC’s ability to obtain disgorgement. Justice Gorsuch wrote for the Court; Justice Thomas filed a concurrence raising significant questions about whether disgorgement is now a legal remedy triggering Seventh Amendment jury-trial rights.

While the core holding was widely anticipated, the opinion’s reasoning, and what it deliberately left unresolved, carry practical consequences that warrant close attention.

What the Court Held

The case arose from SEC civil enforcement proceedings against Ongkaruck Sripetch, who engaged in multiple fraudulent schemes involving penny‑stock companies, including classic “pump‑and‑dump” operations. In response to the SEC’s demand for more than $4.1 million in disgorgement, Sripetch argued that, in accordance with the traditional equitable principles that govern disgorgement under Liu, disgorgement should only be available if the SEC proves investors suffered financial (pecuniary) loss. Sripetch claimed the SEC lacked such proof here. 

The district court sided with the SEC, and the Ninth Circuit affirmed on the grounds that proof of investor pecuniary loss is not required for the SEC to obtain disgorgement. That ruling aligned the Ninth Circuit with the First Circuit and deepened a conflict with the Second Circuit, which had required proof of investor loss.

The Supreme Court granted certiorari to answer one narrow question: whether the SEC must show investor pecuniary loss before obtaining disgorgement under either of two provisions of the Securities Exchange Act:

• Section 78u(d)(5), which authorizes the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors” and is the provision the Court construed in Liu; and
• Section 78u(d)(7), added by Congress in 2020 after Liu, which expressly authorizes the SEC to seek “disgorgement” of “unjust enrichment.”
  
  

Among other equitable requirements, Liu held that disgorgement under Section 78u(d)(5) is limited to the wrongdoer’s net profits attributable to the wrongdoing and must be awarded for victims (i.e., investors). In Sripetch, rather than decide whether Section 78u(d)(7) changes the scope of the SEC’s authority to recover disgorgement, the Court determined that, even if Liu applies under Section 78u(d)(7), the principle that disgorgement may only be awarded for victims does not require the SEC to prove that any investors suffered a pecuniary loss. Being “awarded for victims” means that the SEC must show that the defendant’s misconduct invaded investors’ legally protected interests, not that investors suffered financial harm as a result of that invasion. Emphasizing that disgorgement is focused on compelling a wrongdoer to part with his ill-gotten gains, the Court explained that when a defendant enriches himself without leaving the plaintiff financially worse off, equity prefers stripping the defendant of unjust gains rather than allowing him to keep the proceeds of misconduct.

Limits and Future Questions

Consistent with its generally incremental approach in securities litigation matters of deciding only what is necessary to resolve a particular case, the Court’s holding in Sripetch is extremely narrow. Indeed, Justice Gorsuch’s opinion arguably raises more questions than it answers. The biggest unknown that lower courts must continue to grapple with is delineating the precise relationship between Section 78u(d)(7) and the equitable principles underlying Liu. The Court acknowledged the 2020 statutory amendments left Section 78u(d)(5) (equitable relief) in place, while adding express authorization for the SEC to obtain disgorgement of unjust enrichment in Section 78u(d)(7) and adopting separate limitations periods for equitable remedies and disgorgement. Did these amendments, which undoubtedly reflect some form of congressional response to Liu, give the SEC authority to obtain disgorgement free from Liu’s equitable constraints? Or did Congress intend that Liu would still apply to Section 78u(d)(7)? Is the disgorgement now sought by the SEC “legal” or “equitable” in nature, or can the SEC choose which provision to sue under (and thereby, for example, avoid a jury trial under Section 78u(d)(5))? Lower courts have been divided over these issues, and the Court in Sripetch refused to engage with them. 

This uncertainty has a host of practical implications. The Court recognized concerns that the SEC might use its disgorgement authority to obtain money for the U.S. Treasury rather than compensation for victims (Liu left open the issue of when this practice is permissible). It noted that such practices could raise questions about whether Section 78u(d)(7) permits this remedy, and whether particular applications of disgorgement implicate the Seventh Amendment, as discussed in SEC v. Jarkesy (which requires a jury trial when the SEC seeks civil penalties under the securities laws). In 2024 alone, the SEC obtained orders to disgorge $6.1 billion, while returning only $345 million to victims. If Section 78u(d)(7) operates independently of Liu’s constraints, that disparity may be entirely lawful. If it does not, the SEC’s current practice may be on a collision course with the Court’s precedents (although even that is unclear given the Court’s reasoning in Sripetch that equity prefers stripping a wrongdoer of ill-gotten gains over the alternative). 

Is Disgorgement Now a Legal Remedy Requiring a Jury Trial?

Justice Thomas (who dissented in Liu) authored a concurrence arguing forcefully that Congress’s 2020 amendments reclassified disgorgement as a legal remedy that entitles defendants to a jury trial under the Seventh Amendment. His reasoning proceeds from several observations:

• Congress separated disgorgement (Section 78u(d)(7)) from equitable relief (Section 78u(d)(5)) and adopted distinct statutes of limitation for each, which would be entirely superfluous if disgorgement were still a kind of equitable relief.
• SEC disgorgement does not resemble traditional equitable remedies such as constructive trusts, equitable liens, or fiduciary accountings for profits. It more closely resembles legal restitution via common-law assumpsit, which has always been the province of courts of law.
• The SEC’s practice of retaining the vast majority of disgorged funds rather than distributing them to victims makes disgorgement legal in nature.
  
  

As noted above, the circuits have already split on this question. The Fifth Circuit has held that statutory disgorgement is legal in nature, while the Second Circuit disagrees. Justice Thomas signaled that this is an issue that the Court will soon need to address.

Practical Takeaways

Gain-Based Exposure Is Now the Central Enforcement Risk Metric

The most immediate consequence of Sripetch is that disgorgement exposure should be measured by what the defendant gained, not by what investors lost. Internal investigations and compliance reviews should identify and quantify any profits attributable to potentially violative conduct, even where no investor appears to have been harmed financially. This is a meaningful shift for risk assessment in situations involving undisclosed conflicts, promotional arrangements, or manipulative trading in which investors’ portfolio values may have ultimately recovered or even increased.

The Remaining Defensive Toolkit

Arguments that no one lost money will no longer defeat a disgorgement claim. But the opinion preserves several meaningful lines of defense:

• Causation: Disgorgement remains limited to profits “causally connected” to the violation. Defendants should focus on severing the link between the violation and the claimed gains; for instance, by demonstrating that profits resulted from legitimate market activity rather than the violative conduct.
• Net profits: The Court reaffirmed that disgorgement must be limited to net profits, not gross revenues. Careful documentation of legitimate business expenses and costs can materially reduce the disgorgement calculus.
• Legally protected interests: Where the alleged violation is technical in nature and does not invade investors’ legally protected interests, disgorgement may be unavailable altogether. This defense will be most relevant in cases involving record-keeping or procedural violations. The SEC still needs to identify a victim of the misconduct it is charging, even if that victim was harmed in a manner that did not involve a pecuniary loss.
• Compensation: Liu’s (admittedly vague) limitations on the SEC’s ability to pay disgorgement into the U.S. Treasury and requirement that disgorgement benefit victims remain a viable defense issues post-Sripetch.     
  
  

Jury trial: Particularly in those federal circuits that have not weighed in on this issue, and with the benefit of the reasoning in Justice Thomas’s concurrence, defendants should assert their right to a jury trial (where tactically advantageous) and litigate that issue vigorously.