WASHINGTON, DC – Following today’s oral argument at the Supreme Court in Sripetch v. Securities and Exchange Commission, a case in which the Court is considering whether investor harm is a prerequisite to an award of disgorgement in a civil action brought by the Securities and Exchange Commission (SEC), Constitutional Accountability Center Legal Fellow Simon Chin issued the following reaction:

Disgorgement is a remedy that requires wrongdoers to give up ill-gotten gains. It is not a form of compensation for victims’ losses. In this case, the petitioner argues that the SEC should be required to prove that investors suffered financial harm before it can order a fraudster to give up profits gained through fraud. As the amicus brief we filed on behalf of the nation’s leading remedies scholars explains, that position contradicts three centuries of settled law. Courts have long ordered wrongdoers to disgorge profits based on the fundamental principle that a person may not profit from his own wrongdoing. That principle applies across a wide range of legal contexts, including intellectual property, fiduciary duty, trespass, and conversion. In none of these contexts has a plaintiff ever been required to prove financial loss before recovering a wrongdoer’s profits.

Today’s argument made clear that the Supreme Court is taking this history seriously. Justice Jackson cited CAC’s brief, emphasizing that courts have traditionally exercised equitable authority to deprive wrongdoers of ill-gotten gains under the principle of unjust enrichment. Justice Kavanaugh also cited our brief directly, asking the petitioner’s counsel to respond to it. And Justice Sotomayor echoed our argument, noting that a considerable body of case law demonstrates that disgorgement as an equitable remedy has never required proof of pecuniary harm.

If the Court were to accept the petitioner’s position, the consequences would reach far beyond the SEC’s enforcement authority. It would unsettle fundamental principles of restitution law that courts have relied on for centuries.

Wrongdoers should not be permitted to keep the profits of their wrongdoing simply because their victims’ losses might be difficult to prove.