Key Notes:
- In Sripetch v. SEC, the Supreme Court unanimously held that the SEC need not prove investors suffered pecuniary loss before obtaining disgorgement of a securities violator’s ill-gotten gains. Disgorgement requires only that a defendant’s misconduct invaded investors’ legally protected interests.
- The decision clarifies Liu v. SEC: while disgorgement must be “awarded for victims,” traditional equitable principles do not require proof of pecuniary loss before an investor qualifies as a victim. Defendants may still contest net-profit calculations, causation, expense deductions, distribution plans, and whether the violation actually invaded investors’ protected interests.
In Sripetch v. SECi, the Supreme Court unanimously held that the SEC need not prove investors suffered pecuniary loss before obtaining disgorgement of a securities violator’s ill-gotten gains. The decision clarifies a point left open after Liu v. SEC:ii an investor may be a “victim” for disgorgement purposes without proof of out-of-pocket financial harm, so long as the defendant’s misconduct invaded the investor’s legally protected interests and generated unjust profits.
The case arose from Ongkaruck Sripetch’s penny-stock fraud schemes. After consenting to judgment, Sripetch resisted the SEC’s $4.1 million disgorgement request, arguing investors had suffered no financial losses. The Ninth Circuit held pecuniary harm was not required, deepening a split with the Second Circuit’s contrary decision in SEC v. Govil.iii The Supreme Court granted certiorari to resolve the conflict.
Writing for the Court, Justice Gorsuch distinguished damages from disgorgement: damages compensate plaintiffs for loss; disgorgement strips wrongdoers of gains from invading protected interests. Traditional equity has long permitted gain-based remedies even absent measurable financial loss.iv The Court assumed without deciding that disgorgement remains equitable, subject to the “awarded for victims” rule, but held that no pecuniary-loss showing is required.v
The practical consequence is significant. In market-manipulation, insider-trading, and offering-fraud cases, loss causation from investor to investor is often difficult to prove. Sripetch allows the SEC to pursue disgorgement without converting remedy hearings into damages trials. The Second Circuit’s Govil decision had required proof of pecuniary harm,vi but Sripetch forecloses that reading, confirming that disgorgement may reach ill-gotten gains even when those gains do not correspond to identifiable investor losses.vii
Sripetch applies rather than expands Liu. The Liu Court held that SEC disgorgement qualifies as equitable relief only when limited to net profits and awarded for victims.viii The Sripetch majority rejected Sripetch’s reading of “for victims” as requiring proof of pecuniary loss.ix Defendants may still contest net-profit calculations, causal connection, expense deductions, distribution plans, and whether the violation actually invaded investors’ protected interests. Justice Thomas concurred, pressing his view that Section 78u(d)(7) converted disgorgement into a legal remedy carrying Seventh Amendment jury-trial rights.x
The opinion is not a blank check. The Court declined to decide whether Section 78u(d)(7) permits departures from equitable principles, including the requirement that disgorged funds be awarded for victims.xi Justice Thomas’s concurrence underscores unresolved constitutional questions. The Fifth and Second Circuits have split on whether Section 78u(d)(7) transformed disgorgement into a legal remedy.xii Layered atop SEC v. Jarkesy,xiii which held the Seventh Amendment entitles defendants to jury trials when the SEC seeks civil penalties, this points toward future litigation: defendants will increasingly demand jury trials and challenge awards functioning as Treasury-bound penalties.xiv The majority signaled that using Section 78u(d)(7) to pursue Treasury penalties rather than victim compensation would “proceed beyond what Liu held § 78u(d)(5) tolerates.”xv
For enforcement defendants, the focus shifts from categorical “no investor loss” arguments to fact-specific challenges: unjust enrichment, causation, net-profit calculations, distribution plans, and the remedy’s legal-versus-equitable character. The SEC retains a powerful, loss-independent disgorgement tool.xvi Defendants should redirect efforts toward Liu’s net-profits and victim-compensation limits,xvii whether the Commission can show that investors’ legally protected interests were actually invaded,xviii and whether the Seventh Amendment entitles them to a jury.xix The pecuniary-loss question is settled; the question of whether disgorgement is equitable at all, and thus whether it may proceed without a jury, now must be decided.
[i] Sripetch v. SEC, 2026 U.S. LEXIS 2356 (2026).
[ii] Liu v. SEC, 591 U.S. 71 (2020).
[iii] SEC v. Govil, 86 F.4th 89, 106 (2d Cir. 2023).
[iv] See Liu v. SEC, 591 U.S. 71, 79–80 (2020).
[v] Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *11–12, *17–19 (2026).
[vi] SEC v. Govil, 86 F.4th 89, 106 (2d Cir. 2023).
[vii] Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *12 (2026).
[viii] Liu v. SEC, 591 U.S. 71, 79, 85 (2020).
[ix] Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *16–17 (2026).
[x] Id. at *19–30 (Thomas, J., concurring).
[xi] Id. at *17–19.
[xii] Compare SEC v. Hallam, 42 F.4th 316, 341 (5th Cir. 2022), with SEC v. Ahmed, 72 F.4th 379, 395 (2d Cir. 2023); see Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *30 (Thomas, J., concurring).
[xiii] SEC v. Jarkesy, 603 U.S. 109, 123 (2024).
[xiv] See Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *22–27 (Thomas, J., concurring).
[xv] Id. at *17–18.
[xvi] See id. at *11.
[xvii] Liu v. SEC, 591 U.S. 71, 83–88 (2020).
[xviii] Sripetch v. SEC, 2026 U.S. LEXIS 2356, at *17–19 (2026).
[xix] See SEC v. Jarkesy, 603 U.S. 109, 120–21 (2024).
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