for the United States at 22).3 Op. at 11 (citing SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (SDNY 1970), aff 'd in part and rev'd in part, 446 F. 2d 1301 (2d Cir. 1971); see also Op. at 11 (“The primary purpose of disgorgement orders is to deter violations of the securities laws by depriving violators of their ill-gotten gains.”
for the United States at 22).3 Op. at 11 (citing SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (SDNY 1970), aff 'd in part and rev'd in part, 446 F. 2d 1301 (2d Cir. 1971); see also Op. at 11 (“The primary purpose of disgorgement orders is to deter violations of the securities laws by depriving violators of their ill-gotten gains.”
[2]--- S. Ct. ---, No. 18-1501, 2020 WL 3405845 (June 22, 2020). Kramer Levin attorneys Michael J. Dell and Chase Henry Mechanick submitted an amicus curiae brief on behalf of the Securities Industry and Financial Markets Association (SIFMA) in support of the petitioners in Liu.[3]312 F. Supp. 77 (S.D.N.Y. 1970), aff’d, 446 F.2d 1301 (2d Cir. 1971).[4]Russell G. Ryan, The Equity Façade of SEC Disgorgement, 4 Harv. Bus. L. Rev. Online 3 (2013).[5]S.E.C. v. R. J. Allen & Assocs., Inc., 386 F. Supp. 866, 880 (S.D. Fla. 1974).[6]Liu, 2020 WL 3405845, at *5-*6.[7]Id.
Although the statutes did not authorize monetary remedies, the Commission convinced the court in SEC v. Texas Gulf Sulphur Co. that the courts’ “inherent equity power to grant relief ancillary to an injunction” afforded an avenue in which to order disgorgement. 312 F. Supp. 77, 91 (S.D.N.Y. 1970), aff’d in part and rev’d in part, 446 F. 2d 1301 (2d Cir. 1971). The Court went on to note that disgorgement is a type of restitution measured by the defendant’s improper gain.
Without the statutory authority to seek civil monetary remedies, the Commission asked courts to order disgorgement as an exercise of their “inherent equity power to grant relief ancillary to an injunction.” SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (S.D.N.Y. 1970). In 1990, Congress specifically authorized the SEC to seek monetary civil penalties.
Justice Sotomayor quoted from SEC v. Texas Gulf Sulphur Co., where the court “emphasized the need ‘to deprive the defendants of their profits in order to . . . protect the investing public by providing an effective deterrent to future violations’.” 312 F. Supp. 77, 91 (S.D.N.Y. 1970), aff’d in part and rev’d in part, 446 F. 2d 1301 (2d Cir. 1971). Third, and finally, she observed that SEC disgorgement does not play a compensatory function, as “disgorged profits are paid to the district court,” who then exercises its discretion to decide how the money will be distributed.
[9] The Kokesh decision is also likely to have a significant long-term impact on SEC enforcement proceedings by reducing the leverage the SEC can apply while negotiating settlements.[1]SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (SDNY 1970), aff ’d in part and rev’d in part, 446 F. 2d 1301 (CA2 1971).[2]Id.
Initially, the only statutory remedy available in agency enforcement actions was an injunction barring future violations of the securities laws. Although the statutes did not authorize monetary remedies, the Commission convinced the court in SEC v. Texas Gulf Sulphur Co., 312 F. Supp. 77, 91 (S.D.N.Y.), aff’d in part and rev’d in part, 446 F. 2d 1301 (2nd Cir. 1971) that “’the inherent equity power to grant relief ancillary to an injunction’” afforded a basis for ordering disgorgement. The award was generally a form of restitution measured by the defendant’s wrongful gain.