We previously posted about how the Southern District of Florida’s and Eleventh Circuit’s decisions in SEC v. Graham undermined the SEC’s long-held position that disgorgement was not subject to the five-year statute of limitations. The SEC recently asked the Supreme Court to examine that decision by joining the petitioner’s request for certiorari in Kokesh v. SEC, a case in which the Tenth Circuit affirmed an award of disgorgement, holding that the five-year statute of limitations did not apply.
In Kokesh, the SEC obtained a final judgment in 2014 that included nearly $35 million of disgorgement that covered ill-gotten gains obtained as far back as 1995. The Tenth Circuit affirmed the final award, diverging with Graham, and holding that disgorgement was not a penalty or forfeiture to which the five-year statute of limitations applied. Kokesh applied for certiorari.
Last week, the SEC urged the Supreme Court to take the case. While briefly stating that the Tenth Circuit correctly ruled that disgorgement is not a penalty or forfeiture to which the statute of limitations applies, the SEC argued that “the issue is important to the administration of the securities laws, and the courts of appeals have reached conflicting conclusions” thereby warranting the Court’s review. Without the Supreme Court’s resolution, the SEC argued that it “is currently impeded by the decision in Graham from obtaining the full disgorgement remedies to which it is entitled” and described Graham as “a significant obstacle to national uniformity in administration of the securities laws.”
If the Supreme Court takes the case, the decision will directly impact the timing of SEC enforcement investigations and actions, as well as the types of remedies the SEC will seek. If the Court declines to grant certiorari, the SEC will likely try to seek different remedies in different jurisdictions for the same conduct. In the meantime, the SEC has increased its requests for tolling agreements in ongoing investigations in an apparent attempt to preserve its ability to seek the full range of remedies in the event that the investigation leads to the filing of an action.