SCOTUS – SEC Disgorgement Authority Upheld (2026)

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## SCOTUS Validates SEC Disgorgement in Securities Enforcement ### Ruling The Supreme Court issued a ruling validating the SEC's use of disgorgement as a remedy in securities enforcement actions (SCOTUSblog, June 2026). Justices ruled to uphold the SEC's authority to use disgorgement — requiring defendants to give up ill-gotten gains — as an enforcement tool in securities cases (SCOTUSblog, June 2026). The decision reinforces the SEC's ability to require defendants to surrender profits obtained through securities violations. ### Legal Background Disgorgement had been challenged following the Court's 2020 ruling in *Liu v. SEC*, which held that disgorgement is available as equitable relief under 15 U.S.C. §78u(d) but must not exceed a defendant's net profits and must be awarded for victims. Subsequent litigation tested the boundaries of that framework. Disgorgement has been a central and frequently litigated tool in SEC enforcement, with prior Supreme Court decisions (notably *Liu v. SEC* in 2020) narrowing but not eliminating its use. This ruling reaffirms and likely expands the SEC's enforcement toolkit at a time of significant regulatory rollback elsewhere (e.g., pattern day trader deregulation, gag rule elimination). ### Impact on SEC Enforcement - **Enforcement leverage**: Disgorgement remains one of the SEC's most powerful financial remedies, often exceeding civil penalty caps. Reaffirmation preserves this leverage in enforcement negotiations. - **Settlement dynamics**: Defendants in SEC investigations lose a key argument for limiting financial exposure — the scope of disgorgement will continue to be contested but the remedy itself is now firmly validated. - **Insider trading cases**: Disgorgement is particularly significant in insider trading enforcement, where ill-gotten gains can substantially exceed statutory penalty limits. ### Strategic Relevance For securities attorneys: disgorgement calculations and the 'net profits' limitation from *Liu* remain the primary battleground. For compliance officers: the ruling reinforces the full financial risk of securities violations beyond penalty exposure. For the SEC: the decision arrives during an enforcement transition period and may influence the new Enforcement Director's strategy. For securities attorneys, compliance officers, and enforcement defense practitioners, this decision has direct and recurring practical implications for case strategy, settlement negotiations, and potential monetary exposure in SEC actions. This is likely to be cited repeatedly in future SEC enforcement litigation and commentary. ### Related Entities - SEC Enforcement Director Transition (2026) - SEC Pattern Day Trader Rule Deregulation (2026) - SEC 'Gag Rule' Elimination (2026) ### Watch For - Lower court application of the ruling in pending SEC cases - Congressional or SEC rulemaking responses - Industry and defense bar reaction