Sripetch v. Securities and Exchange Commission
The Court holds that the Securities and Exchange Commission need not prove that investors suffered a pecuniary loss before it may obtain a disgorgement award against a securities-law violator. Under traditional equitable principles, a court may strip a wrongdoer of the gains attributable to his unlawful conduct even when his victims cannot show any measurable financial harm, so a finding of pecuniary loss is not a precondition to disgorgement.
Opinion: https://www.supremecourt.gov/opinions/25pdf/25-466_5i26.pdf
Case background
Ongkaruck Sripetch engaged in numerous fraudulent schemes involving at least 20 penny-stock companies. After discovering the schemes, the Securities and Exchange Commission brought a civil enforcement action against him, charging six counts of securities fraud and one count of selling unregistered securities. Sripetch consented to the entry of judgment against him and agreed that the court could order disgorgement. When the SEC then sought over $4.1 million in disgorgement, Sripetch objected, arguing that the request violated Liu v. SEC, 591 U. S. 71, because the SEC lacked evidence that his schemes caused investors to suffer any financial losses and so left no victims for whom disgorgement could be awarded. The district court found that the SEC had shown pecuniary loss, but on appeal the Ninth Circuit took a different path, holding that a finding of pecuniary harm is not required at all before a court may order disgorgement. That ruling deepened a split among the Courts of Appeals.
Questions Presented
- Whether the SEC may seek equitable disgorgement under 15 U.S.C. 78u(d)(5) and (d)(7) without showing investors suffered pecuniary harm.
Holding
A showing of pecuniary loss to investors is not required before the SEC may obtain a disgorgement award. Even assuming that disgorgement under Section 78u(d)(7) remains an equitable remedy that must comply with traditional equitable rules — including the rule that disgorgement be awarded for victims — those principles do not demand proof of pecuniary loss. Courts sitting in equity have long deprived wrongdoers of the net profits of their unlawful activity, and a person whose legally protected interests have been invaded may recover the defendant’s wrongful gain even when he has suffered no measurable loss whatsoever. Because traditional equitable principles do not require a showing of pecuniary loss, and nothing in Liu teaches otherwise, the judgment of the Ninth Circuit is affirmed.
The Court
Justice Gorsuch delivered the opinion for a unanimous Court. Justice Thomas filed a concurring opinion.
What this episode contains
This episode is an AI-narrated reading of the majority opinion in Sripetch v. Securities and Exchange Commission, written by Justice Gorsuch.
AI disclosure: The voice in this episode is AI-generated, using a machine learning model styled to loosely resemble the authoring justice. Tone, inflection, pacing, and emphasis are artifacts of the model and should not be attributed to Justice Gorsuch. The text being read is the Court’s published majority opinion, lightly adapted to improve readability for the spoken format.