The Supreme Court Unanimously Holds That SEC Claims for Disgorgement in Civil Suits are Subject to Five-Year Statute of Limitations
On June 5, 2017, in Kokesh v. SEC, No. 16-529, the Supreme Court unanimously held that SEC claims for disgorgement in civil suits for securities violations must be brought within five years of the date the claims accrue. Otherwise, such claims are time-barred by the five-year statute of limitations in 28 U.S.C. § 2462 because disgorgement operates as a penalty under that statute. The Court’s ruling resolves a circuit split but, despite widespread commentary to the contrary, will not meaningfully affect the mainstream SEC enforcement program, which principally is focused on conduct within the limitations period. Resolution of the case will also likely spur an uptick in the number of settled SEC actions in the coming months, as the Staff presents to the Commission settlement recommendations that had been temporarily deferred pending the Kokesh decision. Those cases, including some that will likely involve dated conduct, will represent the first tangible evidence of the impact of Kokesh in the form of lower disgorgement amounts.