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Buckley Commentary & Analysis

"Congress may restore SEC’s disgorgement power" by Meghann Fogarty Kovler and Mehul Madia

Buckley Commentary and Analysis

Meghann Fogarty Kovler, Mehul N. Madia

Congress is considering legislation that would clarify and significantly expand the Securities and Exchange Commission’s disgorgement powers, two years after the Supreme Court curtailed them in ruling that they were penalties subject to a five-year statute of limitations. The decision in Kokesh v. SEC dealt a significant blow to the agency’s enforcement division, which had relied heavily on unfettered disgorgement powers as a means of deterrence.  Now, with older ill-gotten gains unreachable, the SEC has reportedly left close to a billion dollars on the table in the first year following the ruling.

A House of Representatives Committee has passed a legislative fix that would go a long way to restoring the SEC’s disgorgement powers — and clarifying their legitimacy— but the prospects for passage in the wider House and Senate remain uncertain.

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