Supreme Court Clarifies Scope of SEC’s Disgorgement Authority

The United States Supreme Court recently decided Sripetch v. SEC, a case concerning the scope of the Securities and Exchange Commission’s (SEC) authority to seek disgorgement of profits as a remedy against persons accused of securities law violations. The Court unanimously held that the SEC can seek disgorgement without a showing that the defendant’s conduct caused pecuniary harm to investors.

The defendant, Ongkaruck Sripetch, engaged in numerous fraudulent schemes involving at least 20 penny-stock companies. On discovering the schemes, the SEC brought a civil enforcement action against Mr. Sripetch, charging him with six counts of securities fraud and one count of selling unregistered securities. Mr. Sripetch consented to the entry of a judgment against him and agreed that the court could order disgorgement. When the SEC proceeded to seek over $4.1 million in disgorgement, however, Mr. Sripetch objected, arguing that the SEC lacked evidence that his schemes caused investors to suffer any financial losses.

The opinion resolves a split among the federal circuits on whether the SEC is required to show pecuniary harm to investors as a prerequisite for disgorgement. The Supreme Court sided with the circuit that had held no pecuniary harm is required.

See this Goodwin Client Alert for more analysis.

On June 9, Jim Moloney, director of the SEC’s Division of Corporation Finance, addressed the U.S. Chamber Capital Markets Summit. In his statement, Mr. Moloney articulated the rationale behind two recent rule proposals issued by the SEC.

With respect to the SEC’s proposal to reform aspects of the registered offering regime, Mr. Moloney singled out proposed changes that would expand eligibility to use shelf registration. He notes, “Form S-3, the vehicle for shelf registration, currently requires a $75 million public float and a 12-month reporting history — thresholds set in the 1990s that today shut out companies that have earned their place in the public markets and need to raise capital on their own timelines. [This proposal] would replace these obsolete thresholds with two simple questions: (1) Is this company an “ineligible issuer?” and (2) Is this company current and timely in its SEC reporting?”

With respect to the SEC’s proposal to reform aspects of the filer status regime, Mr. Moloney indicated that the SEC would eliminate the current approach that includes five different compliance buckets: large accelerated filers, accelerated filers, non-accelerated filers, emerging growth companies, and smaller reporting companies. Instead, there would be a change to three levels: large accelerated filers, non-accelerated filers, and small non-accelerated filers. The rule would increase the large accelerated filer threshold from $700 million to $2 billion in public float, reserving the most demanding disclosure rules and reporting deadlines for the largest corporations. Reduced reporting requirements would apply to all other public companies — 81 percent of all public issuers but only 6.5 percent of total market public float.

On June 9, SEC Commissioner Hester M. Peirce delivered remarks at the U.S. Chamber of Commerce Capital Markets Summit in which she recapped her history at the SEC and provided expansive thoughts on the role of the Commission. Commissioner Peirce noted:

“The SEC, as part of the government, must limit itself to the exercise of powers given to it by the people. The SEC celebrated its 92nd birthday on Saturday; on June 6, 1934, the Securities Exchange Act, which created the SEC, became law. This law and other statutes give the agency its powers. We do not have the consent of the American people to exercise powers not conferred upon us by those statutes. I may have written the law differently if I were holding the pen, but my job is to follow statutory directives as given by Congress. We cannot freelance outside of these directives, and, of course, the ultimate constraint on SEC action is the Constitution; even if the statutes tell us to do something, we cannot do it if it contravenes the Constitution.”

Commissioner Peirce began serving as a commissioner in 2018, and her term expired in 2025. She has served in a holdover capacity since then; however, this holdover term is limited to 18 months. As a result, Commissioner Peirce will leave her post this fall and take a position as a law professor at Regent University.

By statute, the SEC is to be composed of five commissioners appointed by the president by and with the advice and consent of the United States Senate. Not more than three of such commissioners may be members of the same political party, and in making appointments, members of different political parties are required to be appointed alternately as nearly as may be practicable. The SEC currently has two vacancies for non-Republican members, and the coming departure of Commissioner Peirce will create a third.

On June 9, 11 US Senators wrote a letter to the White House urging the appointment of a Democrat to the SEC. The letter notes, “A full slate of commissioners ... can bring a range of perspectives to policies that shape our markets.” The Senators go on to assert, “If the President nominated a Republican to replace Commissioner Peirce without also nominating a Democrat to the SEC, he would violate the Securities Exchange Act.”

Proxy advisory firm Glass Lewis has issued a report with observations on trends for Rule 14a-8 shareholder proposals during the 2026 proxy season (through April 2026). In particular, the report aims to assess the impact of the SEC’s November 2025 statement that it would refrain during the 2026 proxy season from issuing no-action letters in most contexts where companies decide to exclude proposals from their proxy statements.

Key observations in the report include:

• The number of Rule 14a-8 proposals submitted decreased year over year by approximately 47%; however, the number of shareholder proposals that went to a vote is only down by approximately 8%, as the number of exclusion notices filed by companies dropped by nearly half.
• Of 45 exclusion notices submitted by companies, eight were withdrawn and 37 led to exclusions.
• Of the 37 excluded proposals, 24 related to governance matters, six related to social issues, two related to environmental issues, and five were not categorized.
• Of proposals making in onto the ballot, 54% involved governance matters, 33% involved social issues, and 13% involved environmental issues. In contrast, in 2025, social issues accounted for 46% of proposals that made it onto the ballot.

Glass Lewis also observes, “The SEC's current ‘no objection’ approach creates a more complex landscape for engagement and negotiation while leaving boards (and the SEC itself) exposed to litigation.”