Regulation
Supreme Court Reins in SEC on Disgorgement
While the SEC holds a huge amount of influence and power, they do not operate without oversight, themselves. This was on full display on Monday, as the U.S. Supreme Court issued a new ruling on SEC authority surrounding disgorgement.
Essentially, it was ruled that, while the SEC will retain the ability to seek disgorgement from offending parties, it will be limited to their profits. This means that if a company raises $50M through illegal means, the SEC can only seek to retrieve funds up to the $50M minus any genuine operating costs.
The purpose for this limit is a simple one – disgorgement is permitted as a remedial, rather than punitive, action. If the SEC were to seek funds exceeding what was raised, it would no longer represent a retrieval of funds, but a punishment for their actions.
Furthermore, the ruling indicates that funds, retrieved through these means, are to be used as compensation for victims that have lost money.
Disgorgement
For those unfamiliar with disgorgement, it refers to the repayment of funds received/generated by parties which violated existing laws.
In recent years, disgorgement has been a commonly used method of the SEC, as made evident in various cases stemming from the 2017 ICO boom.
Commentary
For those interested, the entirety of the U.S. Supreme Court’s ruling can be found HERE. While there are various intricacies involved, the court’s decision can be broadly summarized by their statement, as follows.
“The Court holds today that a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible under §78u(d)(5).”
Recent Examples
As aforementioned, the SEC has turned to disgorgement on various occasions, as of late. The following articles are a few examples of it being used in crypto based cases.
After Months of Silence by ICOBox, the SEC Seeks ‘Default Judgement’ and ‘Permanent Enjoinment’
SEC Levies Various Charges against ‘Teshuater’
Veritaseum Hit with $8 Million in SEC Fines
SEC
Based in the United States, the SEC is a government run regulatory body. This outfit is tasked with fostering safe, and transparent, markets surrounding securities. This entails both the creation, and enforcement, of laws surrounding the sector.
SEC Chairman, Jay Clayton, currently oversees operations.
In Other News
While Jay Clayton may still be in charge at the SEC, his time at the helm may soon be coming to a close. We recently touched on a tricky situation, currently evolving, which would see Clayton depart the SEC for a position as an Attorney General in Southern New York.
