Charles R. Kokesh v. Securities and Exchange Commission
Issues
Does the five-year statute of limitations in 28 U.S.C. § 2462 apply when the Securities and Exchange Commission compels offenders to disgorge the proceeds of their illegal activity?
In this case, the Supreme Court will decide whether the five-year statute of limitations on forfeitures and penalties in 28 U.S.C. § 2462 applies when the Securities and Exchange Commission (“SEC”) directs a wrongdoer to surrender proceeds stemming from his illegal activity (“disgorgement claims”). Petitioner Charles R. Kokesh argues that § 2462 applies to SEC disgorgement claims because these claims fell within the ordinary meaning of “forfeiture” at the time Congress enacted the statute. In addition, Kokesh contends that § 2462 applies because disgorgement claims are in part to punish the wrongdoer and are therefore penalties. Respondent SEC counters that disgorgement claims are not forfeitures under § 2462 because the term “forfeiture” was only intended to include procedures to take tangible property when Congress enacted the statute. The SEC also argues that disgorgement claims are not penalties because they do not make wrongdoers worse off financially than they would have been if they did not violate the law. This case will resolve a circuit split regarding whether § 2462’s statute of limitations applies to SEC disgorgement claims. In doing so, this case will also determine whether the SEC can enforce U.S. securities laws through disgorgement orders without regard to when the alleged violation occurred.
Questions as Framed for the Court by the Parties
Under 28 U.S.C. § 2462, any “action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued.”
The question presented is:
Does the five-year statute of limitations in 28 U.S.C. § 2462 apply to claims for “disgorgement”?
In 2009, the Securities and Exchange Commission (“SEC”) brought an enforcement action against Charles R. Kokesh, alleging that two investment advisory firms (“Advisers”) that he owned had mishandled the money of four clients (“Funds”). See Brief for Petitioner, Charles R.
Edited by
Additional Resources
- Eric W. Sitarchuk, Kokesh v. SEC—US Supreme Court Set to Decide SEC Disgorgement Circuit Split, The National Law Review (Jan. 17, 2017)
- Carmen Germaine, SEC Asks High Court to Consider Disgorgement Limitations, Law360 (Dec. 14, 2016)
- Seth T. Taube, et al., The Supreme Court to Decide Whether Statute of Limitations Applies to SEC Disgorgement Claims, Baker Botts (Feb. 16, 2017)