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The Employment Law Group,PC. BBB Business Review

Date: June 5, 2017

Law360 quoted Scott Oswald on the likely fallout of the U.S. Supreme Court's opinion in Kokesh v. SEC, which limits the agency's power to seek "disgorgement" of ill-gotten gains. Beyond making it easier for scammers to keep profits from their crimes, Scott noted, the decision also could hurt the Investor Protection Fund, which is used to reward securities whistleblowers under the Dodd-Frank Act.

"If the fund is depleted, it’s a concern for the SEC Whistleblower Office, which has become a real engine for enforcement actions. We can’t allow that to slow down."

R. Scott Oswald

» View on Law360 (Site requires paid subscription.)


SEC Dealt Major Blow With Justices’ Disgorgement Decision

The U.S. Securities and Exchange Commission took a significant hit to its enforcement arsenal Monday morning as the U.S. Supreme Court unanimously held that agency-sought disgorgement is a penalty subject to time limits, a ruling experts say could give the SEC more headaches down the road.

The justices, including recently confirmed Justice Neil Gorsuch, unanimously found that SEC disgorgement is a civil penalty and is subject to a five-year statute of limitations, overturning a Tenth Circuit decision upholding $35 million in disgorgement and $18 million in prejudgment interest against New Mexico investment adviser Charles R. Kokesh.

The high court’s ruling was a sharp rebuke to the SEC, which had maintained that its disgorgement was an equitable remedy not subject to any time limits and one that merely reinstates the status quo by requiring defendants to cough up ill-gotten gains.

“The Supreme Court is thinking about disgorgement in a very different way than the SEC has thought about it,” said Dixie Johnson, co-leader of King & Spalding LLP’s securities enforcement and regulation practice. “And the Supreme Court wins.”

Experts said the decision, the second time the high court has limited the SEC’s ability to extract monetary sanctions after previously applying the statute to its civil penalties in 2013, will be a major restriction on an agency that collects billions of dollars in disgorgement each year.

» View on Law360 (Site requires paid subscription.)

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