Equity, Punishment, and the Company You Keep: Discerning a Disgorgement Remedy under the Federal Securities Laws

Since its inception in 1934, the Securities and Exchange Commission (the “Commission” or the “SEC”) has wielded statutory authority to seek injunctive relief for violations of the federal securities laws. Since 1970 courts have, at the Commission’s behest and without much analysis, ordered violators to disgorge profits – make that lots and lots of profits – gained in the course of their wrongdoing. In some instances, the profits are returned to victims. In others, either because the victims are too many and too scattered or because the violation is a victimless one such as engaging in bribery, the ill-gotten gains are kept by the government. In either case, the existence of the disgorgement remedy has been regarded by the lower federal courts as well settled enough so as to result in SEC disgorgement recoveries of over $2.9 billion in 2017 alone