Sripetch v. Securities and Exchange Commission

    Issues

    Can the SEC pursue equitable disgorgement under 15 U.S.C. §§ 78u(d)(5) and (d)(7) without showing that investors suffered financial harm?

    Oral argument:
    April 20, 2026
    Court below:
    United States Court of Appeals for the Ninth Circuit

    This case asks the Supreme Court to decide whether a showing of financial harm is necessary for the Securities and Exchange Commission (“SEC”) to pursue equitable disgorgement under 15 U.S.C. §§ 78u(d)(5) and (d)(7). Ongkaruck Sripetch argues that congressional intent and prior precedent support a showing of pecuniary harm requirement for disgorgement. The SEC counters that Sripetch misapprehends both congressional intent and Liu v. SEC as mandating a showing of pecuniary harm. Instead, the SEC argues that congressional intent and Liu both limit disgorgement to its usage as a form of compensation for unjust enrichment, which does not require a demonstration of financial harm. This case will have significant ramifications for the effectiveness of disgorgement both as an enforcement tool and as a means of compensating victims.

    Questions as Framed for the Court by the Parties

    Whether the SEC may seek equitable disgorgement under 15 U.S.C. §§ 78u(d)(5) and (d)(7) without showing investors suffered pecuniary harm.

    Facts

    Beginning in the 1970s, courts began ordering disgorgement of wrongfully gained profits as an equitable remedy in securities cases. In 2002, Congress passed the Sarbanes-Oxley Act, which provided a statutory basis for the practice of awarding disgorgement damages. The addition of 15 U.S.C. § 78u(d)(5) permitted the United States Securities and Exchange Commission (“SEC”) to seek equitable relief “for the benefit of investors” in civil enforcement actions. In 2020, the Supreme Court of the United States addressed whether § 78u(d)(5) permitted the practice of disgorgement in Liu v. SEC. Liu held that “equitable relief” under § 78u(d)(5) permitted disgorgement because it resembled typical equitable remedies. However, the Court clarified that disgorgement under § 78u(d)(5) could not exceed traditional common law limits on equitable relief.

    Shortly after Liu, Congress added additional language to 15 U.S.C. § 78u(d)(7) allowing the SEC to seek “disgorgement” of unjust enrichments gained from securities violations. The language of § 78u(d)(7) does not contain § 78u(d)(5)’s equitable language, which the Court interpreted restrictively in Liu. As a result, two circuit splits emerged regarding whether Liu’s limitations apply to § 78u(d)(7) and whether disgorgement under either subsection requires a finding of pecuniary harm. The United States Court of Appeals for the Fifth Circuit determined that Liu does not apply to § 78u(d)(7), while the United States Court of Appeals for the Second Circuit disagreed. The Second Circuit also determined that disgorgement’s status as an equitable remedy required a showing of pecuniary harm, while the United States Court of Appeals for the First Circuit disagreed.

    In 2020, the SEC brought a civil enforcement action in the United States District Court for the Southern District of California against Ongkaruck Sripetch and fourteen other defendants, alleging they engaged in a fraudulent penny stock scheme that harmed retail investors. The SEC sought an order for over $4 million under 15 U.S.C. §§ 78u(d)(5) and (d)(7). Sripetch opposed the SEC’s request for disgorgement, invoking the Second Circuit’s holding that a showing of pecuniary harm is a prerequisite to disgorgement. The SEC urged the district court to reject the Second Circuit’s conclusion and alternatively encouraged a finding that the SEC had sufficiently shown pecuniary harm. The district court assumed pecuniary harm was necessary and determined that the SEC had successfully demonstrated such harm. Thus, the district court granted the SEC’s motion in part and ordered disgorgement of approximately $3.3 million.

    Sripetch appealed the disgorgement decision to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit held that pecuniary harm is not necessary for disgorgement under §§ 78u(d)(5) or (d)(7). The Ninth Circuit agreed that § 78u(d)(5) disgorgement requires the existence of victims under Liu but argued that investors may be victims of securities fraud without suffering pecuniary harm. The Ninth Circuit reasoned that common law disgorgement does not require a showing of pecuniary harm and the Second Circuit’s limitation of disgorgement to actual losses improperly conflates compensatory damages with restitution. Having concluded that Liu does not require a showing of pecuniary harm, the Ninth Circuit stated that there is no reason to assume that the standard for disgorgement under § 78u(d)(7) would be narrower than under § 78u(d)(5). The circuit court concluded that the SEC is not required to show pecuniary harm when it seeks disgorgement.

    On October 14, 2025, Sripetch petitioned the Supreme Court of the United States for a writ of certiorari. The Court granted the petition on January 9, 2026.

    Analysis

    CONGRESSIONAL INTENT OF THE SECURITIES EXCHANGE ACT

    Ongkaruck Sripetch argues that Congress did not intend for § 78u(d) of the Securities Exchange Act (the “Act”) to provide remedies to uninjured investors who lack independent civil recourse under the Act. Sripetch explains that Congress’s exclusion of investors who have not demonstrated pecuniary harm from private litigation plainly contradicts arguments in favor of disgorgement without a showing of pecuniary harm. Sripetch also disputes framing disgorgement as merely containing a higher monetary cap than civil penalties and instead points out that Congress deliberately differentiated between disgorgement and civil penalties. To illustrate the distinction, Sripetch asserts that civil penalties are a form of punishment, whereas disgorgement is compensation to make injured investors whole again.

    Furthermore, Sripetch maintains that Congress’s amendments to § 78u(d) after Liu solidify congressional intent for disgorgement to be limited to a non-punitive equitable remedy. Sripetch elaborates that after Liu provided a clear definition of disgorgement, all Congress did was incorporate the word “disgorgement” into the Act without making any underlying modifications of the statute’s substance. Sripetch asserts that Congress merely followed the longstanding presumption that Congress gives effect to judicial decisions and included “disgorgement” without any further clarifying terms to signal adoption of the Liu holding. Additionally, Sripetch maintains that the amendment of other phrases in § 78u(d) is also not an indication of congressional intent to expand disgorgement beyond an equitable remedy that requires a showing of pecuniary harm. Instead, Sripetch contends that Congress omitted mentions of “equitable relief” from § 78u(d)(7) because § 78u(d)(5) sufficiently explains the Act’s remedies. Finally, Sripetch points out that the purpose of the post-Liu amendments to the Act was to restore the five-year limitation period on the government’s ability to seek civil penalties or forfeiture. Sripetch emphasizes that the focus on amending the time limitation occurred specifically because Liu limited disgorgement to its non-punitive purpose that requires a showing of harm.

    In response, the SEC argues that Congress did not intend to require pecuniary harm for disgorgement. The SEC explains that Congress’s inclusion of financial injury requirements in other parts of the Act, but not § 78u’s disgorgement provisions, signals a clear intent to not attach these requirements to disgorgement. The SEC emphasizes that it is a well-accepted principle of statutory interpretation that inclusion of requirements in one section of a statute but omission in another indicates Congress only intended to attach the requirements to sections where they are mentioned explicitly. Accordingly, the SEC asserts that § 78u’s broad mentions of victims’ losses do not suffice to demonstrate congressional intent to require pecuniary harm for disgorgement. The SEC also contests Sripetch’s distinction between disgorgement and penalties in private actions. Instead, the SEC counters that private actions require the plaintiff to prove economic loss, whereas Congress excluded this requirement for disgorgement actions because of the public interest in SEC enforcement.

    Moreover, the SEC contends that the post-Liu amendments to the Act do not require pecuniary harm for disgorgement. Instead, the SEC explains that while the new subsections of the Act specifically allow courts to order disgorgement for unjust enrichment, there is still no pecuniary harm requirement, nor would such a requirement carry over from existing sections. The SEC emphasizes that even if Congress interpreted § 78u(d)(5) to require financial injury to investors, it “would not carry over to new Subsections §§ 78u(d)(3)(A)(ii) and (d)(7).” The SEC pushes back on Sripetch’s argument that the “for the benefit of investors” condition on equitable relief under § 78u(d)(5) implicates disgorgement. The SEC conversely claims the condition refers to the surrender of funds alone, and not a victim compensation requirement that would necessitate economic harm.

    APPLICATION OF LIU AND THE RESTATEMENT 

    Sripetch argues that Liu confined disgorgement to being an equitable remedy designed to compensate victims of violations for their losses. According to Sripetch, the Liu definition means disgorgement cannot be used for punitive purposes that would not require a showing of pecuniary harm. Sripetch explains that the SEC’s focus on using disgorgement solely to strip profits from wrongdoers ignores Liu’s crucial limitation that such funds are to be distributed to victims who have adequately demonstrated injury. Sripetch maintains that the SEC’s test captures only how to calculate disgorgement, as opposed to what disgorgement’s true purpose is under Liu. In addition, Sripetch contests the SEC’s view that Liu captures § 78u(d)(5)’s requirement that equitable remedies must serve “the benefit of investors” and not other principles of equitable relief. Sripetch instead counters that the SEC ignores Liu’s consistent stance that equitable principles must govern, meaning that awards “for the benefit of investors” must necessarily be to remedy economic injury.

    Additionally, Sripetch asserts that the Restatement (Third) of Restitution and unjust enrichment cannot override Liu’s common law-derived definition of disgorgement. Sripetch stresses that the Restatement is not a binding authority that dispositively answers how to interpret the Act. Sripetch maintains that it should not be weighed the same as Liu or the Act itself. Sripetch continues that the Restatement better supports limiting disgorgement to equitable remedy principles, and Congress was likely not relying on individual comments found in the Restatement when it amended the Act. Finally, Sripetch concludes that Liu and the Act, which are both settled law rooted in a long history of common law, should control and align with the equitable remedy limitations of disgorgement.

    In contrast, the SEC argues that Sripetch’s interpretation of Liu inaccurately describes its expansive conception of disgorgement. The SEC elaborates that Liu found § 78u(d)(5) to allow courts to order any necessary equitable remedies, including profit-based awards like disgorgement. The SEC claims that so long as the disgorgement award does not surpass the perpetrator’s profits, § 78u(d)(5) provides for the award to fall within allowable equitable relief, irrespective of demonstrated financial harm. The SEC asserts that like Liu, the new provisions, §§ 78(u)(d)(3)(A)(ii) and (d)(7), authorize disgorgement of the wrongdoer’s unjust enrichment with no requirement of financial injury to investors. The SEC acknowledges that, to ensure that disgorgement serves its intended purpose, the Liu court constrained the use of § 78u(d)(5) to “known victims.” However, the SEC contends that this limitation does not require the victims to show pecuniary harm, and instead ensures disgorgements only serve equitable purposes. The SEC points out that the Liu opinion does not actually mention a pecuniary harm requirement, meaning Sripetch’s interpretation of Liu rests on assuming the language choice of “victims” necessarily implies a group of people who demonstrated pecuniary harm.

    The SEC highlights the Restatement’s definition of disgorgement as a form of restitution for when a defendant wrongfully profited from their wrongdoing. The SEC stresses that the Supreme Court’s repeated reliance on the Restatement in Liu and other relevant cases should afford it substantial consideration. The SEC clarifies that prior editions of the Restatement and the common law, some of which Sripetch relies on, also support disgorgement as not requiring a showing of loss. The SEC concludes that the current § 78u(d) evinces the Restatement’s alignment with Liu because the Act uses disgorgement in reference to surrendered profits in enforcement actions only, and not in relation to pecuniary harm showings.

    Discussion

    NECESSITY OF DISGORGEMENT AS A POLICING TOOL

    Former Securities and Exchange Commission Attorneys (“Former Attorneys”), in support of Sripetch, argue that allowing victimless disgorgement is unnecessary because the SEC could seek civil penalties to prevent violations instead. Former Attorneys note that the civil penalty statute already allows the SEC to seek monetary penalties when there are no identifiable victims. Former Attorneys claim that disgorgement’s only advantage is that civil penalties have statutory limitations while the disgorgement provision under 15 U.S.C. § 78u(d)(7) does not. Former Attorneys assert that the SEC is using disgorgement to get around the guardrails of the civil penalty statute while reaching a similarly punitive result. The U.S. Chamber of Commerce agrees that expanding disgorgement beyond its compensatory purpose is unnecessary because the SEC can pursue criminal and civil penalties to accomplish a deterrent effect. The Chamber of Commerce points out that these alternative penalties trigger jury trial rights under the Seventh Amendment, but equitable remedies like disgorgement do not. This discrepancy, the Chamber of Commerce argues, creates a perverse incentive for the SEC to expand disgorgement remedies to avoid the constitutional checks on punitive damages that the Court imposed in SEC v. Jarkesy.

    Consumer Federation of America (“CFA”), in support of the SEC, asserts that disgorgement is critical to maintaining fair and trustworthy markets. CFA argues that because the SEC does not have the resources required to pursue every reported violation, the limited number of enforcement actions they bring must serve to deter other bad actors. CFA asserts that granting disgorgement in addition to civil and criminal penalties creates the broadest deterrent effect. Therefore, CFA explains, civil penalties cannot be substituted for disgorgement because they serve a different purpose—rather than preventing unjust enrichment, civil penalties operate in addition to disgorgement as penalties for unlawful conduct. Better Markets, Inc. (“Better Markets”) adds that maintaining a varied scheme of judicial remedies for securities fraud is even more important considering weakened administrative remedies and private securities suits. Better Markets argues that Jarkesy unduly limited the SEC’s ability to use its administrative enforcement powers against violators, increasing the importance of judicial forums. Further, Better Markets claims that the proliferation of arbitration clauses has prevented private lawsuits from properly fulfilling their role as a supplement to SEC actions.

    EFFECT ON VICTIMS

    Investor Choice Advocates Network (“ICAN”), in support of Sripetch, argues that the SEC is using disgorgement as a tool to generate revenue for the government rather than to compensate victims of securities violations. ICAN notes that a large amount of money the SEC has collected from disgorgement orders has not been distributed to victims. As an example, ICAN draws attention to the fact that 2024 had the largest figure for ordered disbursements but the smallest amount of disbursed funds. ICAN asserts that while some of the disgorged funds are held in trust for future distribution, the SEC is free to transfer funds to the United States Department of the Treasury if it determines that returning it to victims would be impractical. ICAN claims that the continued practice of ordering disgorgement without requiring the SEC to first identify victims or prove financial injury provides further incentive for the SEC to neglect its distribution duties.

    CFA, in support of the SEC, argues that the SEC’s reported disgorgement data does not show that the SEC uses disgorgement to generate revenue. CFA notes that the SEC’s disgorgement statistics only represent the annual amounts ordered by courts, not the amounts collected by the SEC. CFA explains that the disgorgements ordered by courts are not all paid by violators in the same year, leading to a delay in the SEC’s ability to disburse funds to victims. Further, CFA claims that some violators will never pay because they have gone bankrupt or their wrongful gains have already been spent or depleted. CFA also states that the process for identifying victims and determining a fair allocation of disgorged funds contributes to a lag in disbursements. Regarding fiscal year 2024, CFA explains that the combinations of delays and a single large case led to 2024 being an outlier in both disbursements ordered and funds distributed. CFA argues that it is inaccurate to conclude that the SEC is pocketing disgorged funds based on incomplete statistics.

    Conclusion

    Authors

    Written by:    V. Carter and Olivia Hussey

    Edited by:      Ally Fertig

     

    Additional Resources