Liu v. Securities and Exchange Commission, 140 S.Ct. 1936 (2020)

In this case, the Supreme Court put an end to fifty years of the SEC’s obtaining billions of dollars in unlawful money judgments against private persons. As NELF argued to the Court in its amicus brief, these so-called “equitable disgorgements,” won in SEC enforcement actions, were in fact monetary penalties. As such, they lay outside the equitable power of a federal court to award. NELF showed that earlier cases relied on by the SEC to defend these awards, even though they use the word “disgorgement,” all awarded monetary relief that was restitution to be given to the injured parties in order to restore them to the status quo ante. In the practice at issue here, the U.S. government typically kept any disgorged money SEC obtained in court. In an 8-1 decision, the Supreme Court agreed. It ruled that SEC “disgorgements,” in order to be equitable, are limited to stripping a wrongdoer of unlawful gains for the purpose of returning them to the victims.  The relief must be restitutionary only and aim to restore the status quo ante, just as NELF showed was the historical practice of the Court. The Court’s ruling sounded the death knell for the practice of federal courts exceeding their powers by issuing every year billions of dollars in unlawful money judgment to the SEC.


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