WASHINGTON, DC – Following today’s unanimous decision at the Supreme Court in Sripetch v. Securities and Exchange Commission, a case in which the Court considered whether a showing of pecuniary harm to investors is a prerequisite to an award of disgorgement in a civil action brought by the Securities and Exchange Commission, Constitutional Accountability Center Legal Fellow Simon Chin issued the following reaction:

Today, the Supreme Court unanimously held that the SEC does not have to prove that investors suffered a pecuniary loss before a court can order a securities-law violator to disgorge ill-gotten gains. The Court reached that result by applying traditional equitable principles, under which disgorgement has always been measured by the profits a wrongdoer gained, not by any loss victims suffered.

Justice Gorsuch’s opinion for the Court echoed the central argument of the amicus brief we filed on behalf of five of the nation’s leading remedies scholars—that disgorgement has never required a showing that the plaintiff suffered financial harm. For three centuries, courts have stripped wrongdoers of profits obtained by violating another person’s legally protected rights, whether or not the victim could prove any financial loss.

The Court grounded its reasoning in the same line of equitable cases our brief emphasized, in which courts ordered wrongdoers to surrender their gains even though victims suffered no measurable loss. The Court likewise relied on Dan B. Dobbs and Caprice L. Roberts’s treatise, Law of Remedies, co-authored by one of our amici, and on the Restatement (Third) of Restitution and Unjust Enrichment that several of our amici advised.

As our brief explained, requiring proof of investor loss would have eliminated the very function that disgorgement has served for centuries and unsettled bedrock principles of restitution law far beyond the securities context. Today’s decision declines to take that path and is a victory for the principle that those who violate the law may not profit from their own wrongdoing.