The U.S. Supreme Court yesterday placed limits on the Securities and Exchange Commission’s practice of forcing defendants to surrender profits obtained through fraud as part of its enforcement of investor-protection laws in federal courts, Reuters reported. The court reaffirmed the agency’s authority to seek disgorgement, a part of its civil enforcement arsenal aimed at passing on funds acquired in fraudulent schemes to the original investors. But the 8-1 ruling, authored by liberal Justice Sonia Sotomayor, limited the scope of what can be sought via disgorgement to no more than the net profits of the conduct at issue. The court also decided that disgorgement generally must go to investors.
