Over the last several years, the United States Supreme Court has issued a series of decisions addressing the SEC’s powers to seek disgorgement against alleged securities law violators. Last Thursday, in the latest decision in the recent series, the Court issued a unanimous decision holding in Sripetch v. SEC that the SEC can seek disgorgement as a remedy even if the agency cannot prove that investors suffered a financial loss. The decision, which resolves a split between the federal judicial circuits on the issue, represents an affirmation of the SEC’s disgorgement authority. The Supreme Court’s June 4, 2026, ruling can be found here.

Background

Ongkaruck Sripetch was one of fifteen defendants named in a civil SEC enforcement lawsuit, in which Sripetch was charged with six counts of securities fraud and one count of selling unregistered securities. Sripetch agreed to a consent judgment on the merits but resisted the SEC’s disgorgement request. The district court granted the SEC’s disgorgement request, stating that it “assumed without deciding” that a showing of investors’ pecuniary harm was required in order for disgorgement to be ordered, concluding that the SEC “had made the requisite showing.”

The court ordered disgorgement of approximately $2.5 million, as well as prejudgment interest of over $1 million. Sripetch appealed the district court’s order regarding disgorgement.

The Ninth Circuit affirmed the district court but on differing grounds. The Ninth Circuit, unlike the district court, addressed the statutory question on what the SEC must show in order to obtain disgorgement, holding that “pecuniary harm” to investors was not a “precondition” to disgorgement under the relevant statutory provisions, stating that it did not matter whether the SEC established pecuniary harm.

The Ninth Circuit expressly recognized that a split between the circuits exists on the question of whether or not the SEC must show the existence of pecuniary harm to investors in order to obtain disgorgement. The First Circuit, with which the Ninth Circuit agreed, has held that a finding of pecuniary harm is not required. The Second Circuit, whose rulings the Ninth Circuit rejected, had found that the disgorgement remedy is only available if an individual or entity suffered pecuniary harm as a result of the defendant’s wrongdoing. The Ninth Circuit, agreeing with the First Circuit and rejecting the Second Circuit, found that under the relevant statutory provisions “a claimant need not show any loss whatsoever, let alone a pecuniary loss.”

Sripetch filed a petition to the United States Supreme Court for a writ of certiorari, in reliance on the split in the judicial circuits. In an unusual development, the SEC did not oppose Sripetch’s cert petition, stating in its response that the question presented was “recurring and important,” and that the circuit split presented a significant problem for the agency.

As discussed here, on January 9, 2026, the Supreme Court granted Sripetch’s petition. The question presented is “Whether the SEC may seek equitable disgorgement under 15 U.S.C. 78(u)(d)(5) and (7) without showing investors suffered pecuniary harm.”

The Court’s Decision

On June 4, 2026, in an opinion written by Justice Neil Gorsuch for a unanimous court (with Justice Clarence Thomas joining the majority but concurring in a separate opinion), the Supreme Court affirmed the Ninth Circuit, agreeing with the Circuit Court that a showing of pecuniary loss is not required before the SEC may obtain a disgorgement award.

Justice Gorsuch said, in reliance on case authority from a variety of jurisdictions, that courts have long required defendants to disgorge ill-gotten gains even without proving that the plaintiff was financially disadvantaged by the defendant’s conduct. What the cases show is that “applying traditional equitable principles, a court ordered the defendant to disgorge the value of the gain attributable to his invasion of the plaintiff’s legally protected interests without requiring a showing of pecuniary loss.”

Sripetch had argued that the Court’s 2020 decision in Liu v. SEC (discussed in detail here), which held that disgorgement must be “awarded for victims,” required that a showing of pecuniary loss was necessary before a person may qualify as a “victim” entitled to an award of the wrongdoer’s profits. The Court rejected this argument, saying that in some instances “a defendant can enrich himself even without leaving a plaintiff worse off financially.”

Justice Thomas joined in the Court’s holding that a showing of pecuniary loss is not required to support disgorgement. However, he separately argued that under the provisions of the Exchange Act, disgorgement is now a legal rather than an equitable remedy, and therefore that a defendant from whom the SEC is seeking disgorgement is entitled to a jury trial under the Seventh Amendment.

Discussion

One reason it is always interesting when the Supreme Court agrees to take up a securities law case – something that happens relatively rarely – is the possibility that the Court might say something that is redefining about the securities laws or that will have a significant impact. As it has turned out, the Court didn’t say or do any of that in this case.

The Court’s ruling addressed a narrow issue relevant to a relatively narrow category of cases – that is, cases in which the SEC seeks disgorgement where the victims suffered no financial loss. This issue has come up often enough that there was a circuit split on the issue, but otherwise it is likely to come up in only a narrow subset of cases.

The Court said little beyond the immediate issue. Indeed, the Court identified, without addressing, a number of other issues that might come up in other disgorgement cases, clearly reserving those other questions for another day.

Perhaps the more important thing about this decision is that it affirmed the SEC’s assertion of its disgorgement authority. It is to that extent arguably different from the Supreme Court’s two most recent prior cases discussing the agency’s disgorgement authority.

As noted above, the Liu case identified a restriction of the agency’s authority (that it applies only if there are “victims”). In its 2017 decision in Kokesh (discussed here), the Court said the SEC’s disgorgement authority was subject to a five-year statute of limitations. Thus, the two prior SEC disgorgement-related decisions recognized limitations on the SEC’s disgorgement authority, whereas in this latest case, the Court rejected the petitioner’s argument for further limitations on the agency’s disgorgement authority.

The Court’s decision in the Sripetch case reinforces the view that the SEC has potent power in its disgorgement authority. SEC observers, commenting on the reduced amounts of enforcement activity overall under the current administration, might question the continued relevance of this authority now. However, the current SEC leadership has voiced its intent to seek to protect victims of investor fraud, and to that extent at least the agency’s  disgorgement authority remains highly relevant.

The case before the Supreme Court did not directly involve D&O insurance issues. However, the question of whether D&O insurance is available to indemnify companies for amounts the companies are ordered to pay by way of disgorgement is a recurring one (as discussed most recently here).

In various recent decisions in insurance coverage disputes involving questions about disgorgement, the U.S. Supreme Court’s recent pronouncements about the SEC disgorgement authority have played an important role. It seems likely that the Sripetch decision will continue this tradition; in particular, I suspect strongly that parties in future coverage disputes about disgorgement will reference the Sripetch decision – specifically, the opinion’s various references to “ill-gotten gains.”