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Beyond disgorgement: the impact of Kokesh on the SEC’s pursuit of equitable remedies

Brad Karp (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Andrew Ehrlich (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Lorin Reisner (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Audra Soloway (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Richard Tarlowe (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Maia Lichtenstein (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)
Peter Vizcarrondo (Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 29 August 2018

Issue publication date: 9 October 2018

Abstract

Purpose

This paper aims to explain the US Supreme Court’s ruling in Kokesh v. SEC, which limited the U.S. Securities and Exchange Commission’s (SEC) ability to seek the remedy of disgorgement and to examine how lower courts have applied the ruling to other types of equitable relief that that the SEC commonly pursues.

Design/methodology/approach

This study explains why the Supreme Court in Kokesh ruled that disgorgement is a “penalty” and that the five-year limitations period therefore was applicable to actions seeking disgorgement; discusses a footnote in Kokesh that left open the question of whether the SEC has the power to pursue disgorgement at all; and reviews four recent cases that grapple with the application of Kokesh to injunctions and lifetime bars.

Findings

Lower courts and the SEC have not settled on how Kokesh might impact equitable remedies commonly pursued by the SEC, but recent cases indicate that the effect of Kokesh may be broader than its narrow holding suggests.

Originality/value

Practical guidance from experienced white collar and regulatory defense lawyers that consolidates several recent developments in one piece.

Keywords

Acknowledgements

Editor’s Note: This article is not intended to provide legal advice, and no legal or business decision should be based on its content.

Citation

Karp, B., Ehrlich, A., Reisner, L., Soloway, A., Tarlowe, R., Lichtenstein, M. and Vizcarrondo, P. (2018), "Beyond disgorgement: the impact of Kokesh on the SEC’s pursuit of equitable remedies", Journal of Investment Compliance, Vol. 19 No. 3, pp. 13-16. https://doi.org/10.1108/JOIC-04-2018-0031

Publisher

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Emerald Publishing Limited

Copyright © 2018 Paul, Weiss, Rifkind, Wharton & Garrison LLP.