The US Supreme Court unanimously held in Kokesh v. Securities and Exchange Commission that a five-year limitations period applies to disgorgement claims brought by the United States Securities and Exchange Commission (SEC) in enforcement proceedings. In particular, the Court held that "SEC disgorgement constitutes a penalty" within the meaning of 28 U.S.C. § 2462, which provides that government actions seeking a "civil fine, penalty, or forfeiture" are subject to a five-year limitations period.
While the SEC has acknowledged the applicability of § 2462 to civil penalties, it has long taken the position that disgorgement of ill-gotten gains is not subject to any limitations period because disgorgement is a remedial measure that prevents unjust enrichment by violators of the securities laws. The Supreme Court has now squarely rejected this position, resolving a circuit split on the applicability of the five-year limitations period to SEC disgorgement claims. Our firm has written an Advisory discussing how this decision may impact the manner in which the SEC conducts investigations as well as the approach it takes to remedies it seeks for violations of the securities laws.
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