Supreme Court To Review SEC’s Right To Seek Disgorgement

November 1, 2019 by Dan McCue
The U.S. Securities and Exchange Commission in Washington, D.C. (Photo by Dan McCue)

WASHINGTON – The Supreme Court agreed Friday to hear a case challenging the U.S. Securities and Exchange Commission’s authority to seek disgorgement in fraud cases.

Last year federal regulators recouped $2.5 billion in ill-gotten proceeds from securities fraud.

But on Friday the justices said they will hear an appeal contending that the SEC lacks the power to seek repayment, or disgorgement, of profits from people who have been found to violate securities law.

The appeal comes from two people who were ordered to pay $27 million after a federal court found they engaged in a fraudulent scheme to lure Chinese investors to back a cancer center in southern California.

As is their custom, the justices did not explain their rationale for taking up the case. But at least four justices have selected the case as being of such importance that the Supreme Court must resolve the legal issues.

The justices grant review in approximately 80 of the 7,000 to 8,000 petitions filed with the court each term.

Arguments will take place in late winter or early spring.

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