UNRAVELING THE DISGORGEMENT REGIME

Authors

Piras, Alessandro

Abstract

Disgorgement is a legal remedy requiring those who gain from illegal or wrongful acts to give up any profits they made as a result of that conduct. The current state of disgorgement is uncertain, marked by rising tension between limitations in recent Supreme Court jurisprudence and newly enacted statutory authority granted to the Securities Exchange Commission (SEC) by Congress. Problems emerging from this regime threaten to render adjudication of disgorgement actions ineffective and inconsistent, potentially damaging the integrity of the financial system and eroding public trust in the markets. A comprehensive legislative framework is needed to fill in the gaps; one that firmly delineates the bounds of the disgorgement remedy and also sheds light on its ambiguities.

This note paints a full picture of the pertinent legal landscape. In doing so, the intricate knots tying the Supreme Court’s Liu v. SEC opinion to the text of 15 U.S.C. § 78u are unraveled and disgorgement’s duality as equitable and statutory is revealed. In light of the apparent bifurcation, this note proposes additional legislation on the matter in order for litigation to meaningfully move forward under a single theory in future SEC enforcement actions. Setting aside uncertainty on this topic is necessary as disgorgement awards have made up the largest monetary recovery in recent years. With clearer guidance from this legislative framework, the SEC’s time and resources can be more effectively utilized in educating Main Street investors rather than spent on litigation.

Recommended Citation

Piras, Alessandro, Case Note, UNRAVELING THE DISGORGEMENT REGIME, 63 Santa Clara L. Rev. 565 (2024).
Available at: https://digitalcommons.law.scu.edu/lawreview/vol63/iss3/4