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Abstract

SEC v. Texas Gulf Sulphur was the first case holding that equitable relief, and specifically disgorgement, can be obtained by the SEC in a federal court action for an injunction against insider trading. Such ancillary equitable relief has been obtained in numerous cases during the fifty years since Texas Gulf was decided. But, the continued availability of the remedy of disgorgement has been thrown into question by the recent Supreme Court case of Kokesh v. SEC, in which the Supreme Court held disgorgement to be a penalty for purposes of the federal statute of limitations. The Court identified, but expressly reserved for the future, issues as to “whether courts possess authority to order disgorgement in SEC enforcement proceedings or . . . have properly applied disgorgement principles in this context.”1 In this essay, I will address these issues left open in Kokesh and argue that in SEC injunctive actions, the federal courts have authority to order disgorgement to prevent unjust enrichment by wrongdoers and to deter future violations of the law.

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