Liu v. Securities and Exchange Commission
Issues
Do the federal securities law statutes authorize the Securities and Exchange Commission to obtain disgorgement for violations under the statutes?
This case asks the Supreme Court to determine whether the Securities and Exchange Commission (“SEC”) may obtain disgorgement in civil actions under its power to seek equitable relief, even though the Supreme Court has previously ruled that disgorgement is a penalty rather than an equitable remedy at least under some circumstances. Petitioners Liu and Wang contend that the Supreme Court ruled in Kokesh v. SEC that disgorgement was a penalty, and that therefore the SEC lacks the authority to order Liu and Wang to disgorge any ill-gotten gains in connection with their investment fund. The SEC counters that Kokesh held disgorgement to be a penalty only for statute of limitations purposes. The outcome of this case has implications on the SEC’s effectiveness in future civil actions at deterring financial crime and at making the victims of financial crime whole.
Questions as Framed for the Court by the Parties
Whether the Securities and Exchange Commission may seek and obtain disgorgement from a court as “equitable relief” for a securities law violation even though the Supreme Court has determined that such disgorgement is a penalty.
Petitioners Charles Liu (“Liu”) and his wife, Xin Wang (“Wang”), operated an investment fund under the EB-5 Immigrant Investor Program for Chinese investors. SEC v. Liu at 2. The United States Citizenship and Immigration Services (“USCIS”) manages and oversees the EB-5 Immigrant Investor Program.
Edited by
Additional Resources
- Peter J. Henning, Can the S.E.C. Force Repayment of Ill-Gotten Gains?, The New York Times: DealBook (Nov. 29, 2019).
- H. Gregory Baker & Alexandra S. Droz, Supreme Court to Review the SEC’s Right to Seek Disgorgement, American Bar Association (Nov. 19, 2019).
- Greg Stohr, Supreme Court Will Consider Stripping SEC of Disgorgement Powers, Bloomberg (Nov. 1, 2019).
- Lawrence Hurley, U.S. Supreme Court to Review SEC’s Power to Recover Ill-Gotten Gains, Reuters (Nov. 1, 2019).