On June 5, 2017, the Supreme Court decided Kokesh v. Securities and Exchange Commission. In 2009, the Securities and Exchange Commission (SEC) alleged that Charles Kokesh had violated various securities laws by concealing the misappropriation of roughly $35 million in various development ventures dating back as far as 1995. Since the 1970s, the SEC has ordered disgorgement in addition to monetary civil penalties in its enforcement proceedings. In effect, the violator must not only pay monetary civil penalties, but also “disgorge” the profit he or she gained by the unlawful action. Under 28 U. S. C. §2462, however, a five-year limitations period applies to “an action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture” when the SEC seeks monetary civil penalties. In Kokesh’s case, the District Court concluded that the five-year limitations period did not apply to disgorgement. The U.S. Court of Appeals for the Tenth Circuit affirmed, holding that disgorgement was neither a penalty nor a forfeiture within the meaning of section 2462. As a result Kokesh could be required to disgorge the full $35 million, with interest.
By a vote of 9-0, the Supreme Court reversed the judgment of the Tenth Circuit. In an opinion delivered by Justice Sotomayor, a unanimous Court held that disgorgement, as it is applied in SEC enforcement proceedings, operates as a penalty under section 2462. Thus, any claim for disgorgement in an SEC enforcement action must be commenced within five years of the date the claim accrued.
And now, to discuss the case, we have Janet Galeria, who is Senior Counsel for Litigation for the US Chamber Litigation Center at the US Chamber of Commerce.