The SEC Won Its Remedy and May Have Lost Its Forum

On June 4 the Supreme Court decided Sripetch v. Securities and Exchange Commission, No. 25-466, holding unanimously that a showing of pecuniary loss to investors is not required before the SEC may obtain a disgorgement award. Justice Gorsuch wrote for the Court. The question had divided the courts of appeals since Liu v. SEC in 2020: the Second Circuit required the Commission to show investors were actually out of pocket, while the First and Ninth Circuits did not.

The reasoning is traditional and narrow. Equity has never conditioned the stripping of unjust profits on proof that an identifiable victim lost money; the wrong being remedied is the defendant's enrichment, not the investor's deficit. Gorsuch framed the choice as between restoring the defendant to the position he occupied before the misconduct and letting him keep what the misconduct produced, and traditional equitable principles answer that question without reference to anyone's losses. Liu's substantive ceiling survives: disgorgement is still limited to net profits from the wrongdoing, not gross receipts.

That is the holding, and on its own terms it is a straightforward win for the Commission. A defendant can no longer argue that sophisticated counterparties were unharmed, or that market movement rather than fraud produced the shortfall, as a bar to disgorgement. What makes the case worth a second reading is a concurrence that no other Justice joined.

Justice Thomas wrote separately to say that the Court had answered a question that may shortly stop mattering. His argument is statutory before it is constitutional. Disgorgement reached the Court in Liu as a judge-made equitable remedy, justified by the general equitable-relief provision and constrained by equity's traditional limits. In 2021 Congress responded to Liu by codifying disgorgement expressly, in 15 U.S.C. § 78u(d)(7), carving it out of the general equitable-relief provision and giving it its own limitations period distinct from the one governing other equitable remedies.

Thomas reads those two choices as doing real work. A remedy that Congress separates from equitable relief and assigns its own statute of limitations is a remedy Congress has treated as something other than equitable, and statutory disgorgement of this kind more closely resembles legal restitution than it does a constructive trust or an equitable lien. If that reclassification holds, the consequence is not academic. The Seventh Amendment preserves the jury right in suits at common law, and a legal remedy sought by the government is the paradigm case. A defendant facing statutory disgorgement would be entitled to a jury.

The structural echo is Jarkesy, which held that a defendant facing SEC civil penalties for fraud is entitled to an Article III court and a jury because the penalty is legal rather than equitable in nature. Thomas's concurrence applies the same sorting exercise to the remedy Congress wrote after Liu, and reaches the same place. The Court in Sripetch expressly declined to decide the statutory question, and Thomas noted that a circuit split on it is already developing.

The strongest response is that Thomas is reading too much into legislative housekeeping. Congress wrote § 78u(d)(7) to repair what Liu had unsettled, and giving a codified remedy its own limitations period is the ordinary way to draft one, not a considered statement about the law-equity divide. Eight Justices declined to join, and the opinion of the Court characterizes disgorgement in equitable terms throughout. On this view the concurrence answers a question the statute never asked.

That response has force and it does not dispose of the point. Jarkesy's method does not ask what Congress called the remedy; it asks what the remedy does. A payment measured by the defendant's gain, ordered by a court, and directed to the Treasury rather than to identifiable victims is difficult to describe as restoring anyone to a prior position, which is the function that made disgorgement equitable in the first place. Sripetch itself sharpens the problem: once the Commission need not show that investors lost anything, the connection between the award and any restorative purpose is thinner than it was the day before the opinion issued. The Court did not have to confront that, because the parties litigated the equitable remedy rather than the statutory one.

The desk's read is that Thomas has the better of the argument on the statutory question and that the unanimity of the judgment says nothing against it, because the judgment did not reach it. It is worth saying plainly that this cuts against the Commission in a case the Commission won, and that the same analysis would apply to a remedy sought by an agency this desk might otherwise think underpowered. The jury right does not depend on who is enforcing or how sympathetic the enforcement is.

The next move is in the courts of appeals, not the Supreme Court. Thomas identified a split already forming on whether statutory disgorgement under § 78u(d)(7) triggers a jury right, and the vehicle that reaches the Court will be a defendant who demanded a jury, was refused, and lost. Expect the question to be pressed in district courts well before it is resolved; a defendant with a live § 78u(d)(7) exposure and nothing else to lose has an obvious incentive to make the demand and preserve it.

For a general counsel the near-term change is one of posture rather than compliance. The loss defense to disgorgement is gone, so exposure models built on the absence of identifiable investor harm now understate the number. The forum question is live but unsettled, and counsel weighing settlement against litigation in a matter with substantial statutory disgorgement should treat a preserved jury demand as an open variable with real settlement value rather than as a decided point in either direction. Nothing here changes what a court will do this quarter.

Bennet's regulatory-intelligence desk tracks enforcement questions where the remedy is settled and the forum is not, which is usually where the leverage sits.