The Supreme Court on Tuesday wrestled with the question of whether the Securities and Exchange Commission has a time limit for seeking disgorgement, in a case brought by New Mexico investment adviser Charles Kokesh.
The central legal issue is whether a federal statute of limitations on fines, penalties and forfeiture also applies to SEC disgorgement actions.
Investment groups, including the private equity industry's American Investment Council, filed amicus briefs urging the Supreme Court to set time limits and overturn orders upholding the SEC's right to disgorgement in the U.S. Court of Appeals in the 1st, 10th and District of Columbia circuits.
Since letting those decisions stand “would give the SEC the power to extract punitive disgorgement against a party for conduct no matter how far in the past, it also upsets private parties' settled expectations and creates potentially chilling uncertainty as to the finality of transactions,” AIC's brief argued.
Chief Justice John G. Roberts Jr. noted that while Congress did not provide explicit guidance on the statute of limitations for disgorgement, “it does seem to me that we kind of have a special obligation to be concerned about how far back the government can go when it's something that Congress did not address because it did not specify the remedy.”
A decision in Kokesh vs. SEC is expected by the end of the court session in late June.