Supreme Court Holds SEC Does Not Need To Prove Pecuniary Loss In Disgorgement

On 4 June 2026, the Supreme Court unanimously decided Sripetch v. SEC, ruling that the SEC does not need to prove that victims of a securities law violation suffered pecuniary loss to obtain disgorgement.

Sripetch follows the Court’s 2020 decision in Liu v. SEC, which held that disgorgement qualifies as an equitable remedy only if awarded for the benefit of victims and limited to the wrongdoer’s illicit profits. In 2021, Section 21(d)(7) was added to the Exchange Act, granting the SEC express disgorgement authority separate from its general equitable authority in Section 21(d)(5). Lower courts disagreed on whether the SEC must show actual financial harm, prompting the Court to take up Sripetch.

Takeaways

The Court limited its ruling to the question of financial harm, holding that—even assuming traditional equitable limitations apply—the SEC does not need to prove victims lost money. In equity, courts have long permitted stripping a wrongdoer of profits from unlawful action where the defendant interfered with plaintiff’s rights, even without proof of financial loss. This is distinct from a claim for damages, which does require showing a monetary loss.

The Court cited numerous historical cases where courts awarded relief even though the plaintiff suffered little or no measurable financial harm, focusing on the benefit the wrongdoer unfairly received rather than the victim’s loss.

Acknowledging Liu’s holding that disgorgement is meant to restore the status quo, the Court identified two possible outcomes: (1) the wrongdoer is stripped of their gains, or (2) the wrongdoer keeps the profits simply because of the plaintiff’s lack of financial harm. The Court held that equity favors the first outcome.

Future Developments

Justice Thomas agreed with the result but wrote separately, arguing that disgorgement under Section 21(d)(7) of the Exchange Act is not an equitable remedy at all, but rather a legal one—similar to restitution—which would entitle defendants to a jury trial under the Seventh Amendment. He noted that the Fifth and Second Circuits currently disagree on this question and predicted the Court will need to address it in a future case.

We acknowledge the contributions to this publication from our summer associate Anna Turrietta.

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