Supreme Court: SEC Claims for Disgorgement in Enforcement Actions Are Subject to Section 2462’s Five-Year Statute of Limitations
01.05.18
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(Article from Securities Law Alert, Year in Review 2017)
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On June 5, 2017, the Supreme Court unanimously held that disgorgement in an SEC enforcement action for violation of the securities laws is a “penalty” subject to Section 2462’s five-year statute of limitations.[1] Kokesh v. SEC, 137 S. Ct. 1635 (2017).
The Court found that disgorgement redresses a public wrong; it is a violation against the United States, not a particular individual. The Court also concluded that disgorgement is imposed primarily as a deterrent. The Court observed that there is no statutory requirement that courts distribute disgorged funds to a defendant’s victims, and courts infrequently do so. Accordingly, the Court held that disgorgement “bears all the hallmarks of a penalty” and “[t]he 5-year statute of limitations in § 2462 therefore applies when the SEC seeks disgorgement.”
[1] Section 2462 states: “Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued.”