The Hollow Supreme Court Disgorgement Victory: SEC Roundup
Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of Investor Choice Advocates Network, a nonprofit advocacy group.
A unanimous Supreme Court ruling on June 4 lets the SEC pursue disgorgement without proving investor harm — but a former SEC economist argues the real bottleneck is getting that money back to victims at all, with billions in collected penalties still sitting undistributed at Treasury.
In the Supreme Court's decision in SEC v. Sripetch, the justices ruled unanimously that the SEC can pursue disgorgement without proving investor harm.
On its face that's a clean win for the agency. But our guest Erin Smith, a former SEC Division of Economic and Risk Analysis official now at Compass Lexecon, discusses her compelling analysis arguing the win may be largely symbolic — because removing the harm requirement doesn't solve the SEC's separate, longstanding problem of actually getting collected money back to real victims.
We get into the mechanics: a $5.2 billion account of collected but undistributed penalties sitting at Treasury, why identifying a genuine "victim" breaks down in cases like insider trading and open-market manipulation, and the Martoma/Wyeth case where the SEC itself fought to keep disgorged proceeds away from the corporate issuer that arguably was harmed.
ICAN is litigating a case now involving a relief defendant — someone never accused of violating any law — who the SEC is still pursuing for disgorgement despite identifying no victims.
See the video for the discussion.
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