Enforcement: SCOTUS Hears Arguments on Limiting SEC’s Disgorgement Powers

Key Takeaways

• SEC secured over $6 billion in disgorgement in FY2024
• Disgorgement total rose to nearly $11 billion in 2025
• SCOTUS hearing could harmonize 2nd and 9th Circuit rulings
• Justice Thomas signaled openness to broader SEC powers
• Outcome will affect enforcement of low‑profile record‑keeping violations

Pulse Analysis

Disgorgement—forcing wrongdoers to surrender ill‑gotten profits—has become the SEC’s workhorse remedy, generating more than $6 billion in fiscal 2024 and nearly $11 billion in 2025. The agency relies on it not only to punish fraud but also to deter future misconduct, especially when victims are diffuse or unidentifiable. By treating the proceeds as an equitable remedy rather than a pure penalty, the SEC can channel funds back to harmed investors or, in some cases, retain them for civil penalties. The sheer scale of recent collections underscores how central disgorgement is to the regulator’s enforcement toolkit.

The Supreme Court’s review in *Sripetch v. SEC* pits the 2nd Circuit’s broader view against the 9th Circuit’s tighter constraints on the remedy’s reach. Over the past decade, the Court has intervened three times on SEC equitable powers, most notably in the 2020 decision that limited disgorgement to the net ill‑gotten profits. The current arguments focus on whether Congress‑enacted post‑2020 statutes effectively restore the agency’s latitude. A ruling that expands disgorgement could streamline cases ranging from minor record‑keeping lapses to high‑profile insider‑trading schemes, while a restriction would force the SEC to lean more on civil penalties and injunctions.

Investors and market participants are watching the outcome for clues about future enforcement intensity. A decision that preserves broad disgorgement authority may signal continued aggressive action by the SEC, potentially raising compliance costs for public companies and their advisers. Conversely, a curtailment could embolden some market actors, knowing that the regulator’s financial clawback tools are limited. Stakeholders should monitor the Court’s opinion, expected later this year, and prepare for possible adjustments in internal controls, disclosure practices, and litigation strategies as the regulatory landscape settles.