In Kokesh v. Securities and Exchange Commission ("Kokesh"), the Supreme Court held that a five-year statute of limitations applies to claims for the disgorgement of ill-gotten gains obtained through violations of federal securities laws. Kokesh follows the holding of Gabelli v. SEC in which the Supreme Court determined that the statute of limitations period applies when the SEC seeks monetary penalties.
In Kokesh, Justice Sonia Sotomayor (writing for a unanimous Supreme Court) held that disgorgement "bears all the hallmarks of a penalty" under 28 U.S.C. § 2462. The Court's analysis was shaped by two guiding principles for determining whether sanctions represent penalties: (i) such penalties typically exist where the wrong that is to be redressed was committed against the public, and (ii) the purpose of a penalty is to deter similar conduct rather than to compensate a victim for loss. In Kokesh, the Supreme Court held that SEC disgorgement constitutes such a penalty.
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