The Supreme Court ruled unanimously yesterday that U.S. Securities and Exchange Commission enforcement actions requiring companies to return illegally obtained profits must conform to a five-year federal statute of limitations, MorningConsult.com reported. The decision in the case, Kokesh v. SEC, further restricts the securities regulator’s ability to require the forfeiture of funds, known as disgorgement. As part of the decision, which Justice Sonia Sotomayor authored, the court rejected a government argument that the disgorgement requirements shouldn’t be ordered because they are a remedial, and not punitive, measure. “This limitations period applies here if SEC disgorgement qualifies as either a fine, penalty, or forfeiture,” Sotomayor wrote. “We hold that SEC disgorgement constitutes a penalty.” Despite being limited in scope to the statute of limitations issue, SEC experts said that the decision could have long-term consequences for SEC disgorgement actions because of the court’s ruling that disgorgement is a penalty instead of a remedy.
