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- Banca IMI Securities to Pay $35Mn for Improper Handling of ADRs in Continuing SEC Crackdown
- Members of White House ‘Arts Panel’ Resign En Masse in Protest of Trump
- FINRA Whiffs on Disciplinary Sanction: Bill Singer's 'Negligent Market Manipulation in OTC Stock Promotion'
- Heather Heyer’s Mother Says, ‘I’m Not Talking to the President’
- Goldman Sachs May Have Lost $100Mn on Energy Bet Gone Wrong
- SEC Drops Case Against Ex-JPMorgan Traders Over 'London Whale'
- Financial Advisers That Invest in Technology Need to Accomplish These Two Things
- FINRA Amends Codes Regarding Expedited Arbitrator List Selection
- FINRA July 2017 Quarterly Disciplinary Review (Podcast)
- Senior Exec in Citigroup's Equities Unit Has Left
- Prudential Plotting its Escape From Fed's Tough Oversight
- Why CEOs Spurned Trump's Business Councils, in Their Own Words
- A Stockbroker, Her LLC, and Her Customers' Loans (Or Investment?) - Bill Singer
- Brian Quintenz Sworn In as CFTC Commissioner
- A Gary Cohn Resignation Would 'Crash the Markets' – Mgmt Guru Jeffrey Sonnenfeld
- Trading Firm DRW to Buy RGM Advisors - As Low Volatility Forces Out Weak HFT Players (subsc reqd)
- Reputational Damage - Rajat Gupta on Hard Road to Recovery
- 7th Circuit Affirms Spoofing Conviction - Bill Singer
- Wells Fargo Announces Board Changes
- Judge Rules Against Ex-Goldman Employee in Fed Leak Case
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NEWSLETTERS & ALERTS
SEC Disciplinary Authority on Trial Before the Supreme Court
The disciplinary authority of the SEC is on trial today in the Supreme Court. At issue is whether limits should be placed on how much ill-gotten gains the SEC may disgorge from a guilty party.
KOKESH V. SEC. In 2009, the SEC filed suit against Charles Kokesh, a New Mexico investment adviser, on charges he misappropriated funds from 4 companies. A jury convicted Kokesh in 2014, and the federal judge ordered him to pay $55.4 million – including $34.9 million in disgorgement.
Kokesh appealed the decision, arguing that disgorgement for activities that occurred between 1995 and 2006 should be subject to the same 5-year statute of limitations that applies to civil fines, penalties or forfeitures under Section 2462 of the U.S. code. If such a limitation was applied, disgorgement in this case would only amount to about $5 million – not $34.9 million.
The SEC countered that disgorgement, which targets the "ill-gotten gain" reaped through a securities-law infraction, does not fall under the 5-year statute of limitations because it is "remedial" rather than "punitive."
IMPORTANCE OF THE CASE. The Supreme Court’s decision is important because disgorgement is a critical weapon of the SEC - particularly when the potential for disgorgement is large and goes back many years. In 2016, alone, the agency obtained more than $4 billion in disgorgement and other penalties.
A Supreme Court ruling in favor of Kokesh would weaken SEC negotiations in its current pipeline of investigations, and it would increase the likelihood past defendants who were disgorged of ill-gotten profits might seek to have their cases re-opened.
WHY THE SUPREME COURT IS HEARING THIS CASE. The Supreme Court agreed to hear this case because there is a split at the circuit level, with the 10th, 1st and D.C. circuits siding with the SEC, and the 11th Circuit holding that a 5-year statute of limitations should be applied to disgorgement. In 2013, the Supreme Court ruled that a 5-year statute of limitations should be applied to SEC civil penalties.
A ruling on this case is expected by the end of the Supreme Court term in July.