Supreme Court: SEC May Obtain Disgorgement Without Proving Pecuniary Losses

In a closely watched case, the Supreme Court unanimously held that courts may order a defendant to disgorge their ill-gotten gains regardless of whether the SEC proves that victims suffered a pecuniary loss.¹ Justice Gorsuch delivered the Court’s opinion, which resolves a circuit split between the Second Circuit (holding that proof of pecuniary loss is required) and the First and Ninth Circuits (holding that such proof is not required). Justice Thomas issued a concurrence urging the Court to recognize in a future case that disgorgement under Section 21(d)(7) of the Securities Exchange Act of 1934 (“Section 21(d)(7)”) is a legal remedy—subject to the Seventh Amendment’s right to a jury trial—rather than an equitable one. Please refer to our prior client alert for background on Sripetch and related disgorgement remedy cases.

Key Takeaways

• No Pecuniary Loss Required: The remedy turns on proving the defendant’s unlawful gain (or loss avoided), not whether the victims suffered a financial loss.
• “Victim” Defined Broadly: A person whose legally protected interests were invaded by a securities-law violation, qualifies as a “victim” under Liu v. SEC, 591 U.S. 71 (2020).
• Narrow Holding: The Court expressly declined to decide whether Congress’s post-Liu enactment of Section 21(d)(7) freed the SEC from Liu’s requirement that disgorgement be “awarded for victims,” leaving that question for a future case.

The Court’s Holding: No Proof of Pecuniary Loss is Required, Regardless of Whether the Remedy is Equitable

The Court assumed, without deciding, that Section 21(d)(7) disgorgement remains an equitable remedy subject to traditional equitable rules, including the rule that disgorgement must be “awarded for victims.”² Even under that assumption, the Court concluded that a showing of pecuniary loss is not required.³

The Court distinguished disgorgement from the legal remedy of damages,⁴ observing that damages are measured by a plaintiff’s loss, but disgorgement is measured by a defendant’s gain attributable to his wrongdoing.⁵ Under traditional equitable principles and precedent,⁶ a person seeking disgorgement “does not need to prove he has ‘suffered a corresponding loss or,’ indeed, ‘any loss.’”⁷ Rather, when a person “‘has suffered an interference with protected interests,’” he may be entitled to restitution of the defendant’s wrongful gain without “‘measurable loss whatsoever.’”⁸

In rejecting Sripetch’s argument that Liu mandates proof of pecuniary loss,⁹ the Court held that no such showing is required under Liu and the traditional equitable principles on which it was based.¹⁰ The Court explained that a pecuniary-loss requirement would be inconsistent with Liu’s description of disgorgement as a remedy designed to restore the status quo.¹¹ And the Court observed that in instances where a defendant is enriched without leaving the plaintiff financially worse off, “equity traditionally prefers” stripping the defendant of his unjust gains from the misconduct.¹²

In addressing Sripetch’s concerns that the SEC might use Section 21(d)(7) to seek penalties for the Treasury rather than as victim compensation, the Court recognized that such a practice could implicate the Seventh Amendment’s right to a jury trial,¹³ but concluded that this potentiality does not justify imposing a pecuniary-loss requirement “foreign to Liu and to traditional equitable principles alike.”¹⁴

Justice Thomas’s Concurrence

Justice Thomas joined the majority’s holding, but wrote separately to express his view that the Court should, in a future case, recognize that disgorgement under Section 21(d)(7) is a legal remedy subject to the right to a jury trial under the Seventh Amendment, as recognized in SEC v. Jarkesy, 603 U.S. 109 (2024).¹⁵ Justice Thomas explained that when the SEC seeks “disgorgement” under Section 21(d)(7), it more closely resembles a legal remedy because the SEC uses it to collect forfeitures or penalties from defendants based on their unjust profits at investors’ expense.¹⁶ Further, in his view, Congress’s decision to enumerate disgorgement and assign it a distinct statute of limitations suggests a legislative choice to make disgorgement a legal remedy.¹⁷

Practical Implications

• Continued SEC Use of Disgorgement Remedy. The SEC can now seek disgorgement in every circuit without proving investor financial loss, removing a key defense to a disgorgement claim in insider trading, market manipulation, and other cases in which proving direct investor losses is difficult. 
• Unresolved Issues. The Court left open the questions of (1) whether disgorgement is available when distribution to investors is infeasible, and (2) whether Section 21(d)(7) eliminates Liu's “awarded for victims” requirement entirely. 
• Evaluate SEC Plans for Disgorged Funds. The Court warned that using Section 21(d)(7) to deposit funds in the Treasury rather than to compensate victims risks crossing into penalty territory. Defendants and their counsel should evaluate whether to challenge disgorgement as an impermissible penalty.
• Jury Trial Demands. Defendants should work with their counsel in all litigated cases to assess the risks and benefits of demanding a jury trial. When the SEC seeks, as it typically does, civil penalties in a federal district court civil injunctive action, the defendant has a right to a jury trial.¹⁸ Consequently, it may be some time before a court has the opportunity to address the question of a defendant’s right to a jury trial when the SEC seeks Section 21(d)(7) disgorgement but does not seek a civil penalty.

¹ Sripetch v. SEC, No. 25-466, slip op. at 12–13 (U.S. June 4, 2026).
² Id. at 7–8.
³ Id. at 8.
⁴ Id. 
⁵ Id. 
⁶ The Court relied on cases in which courts awarded the defendant’s gain to a plaintiff whose legally protected interests had been invaded, without requiring proof of pecuniary loss. Id. at 10–11.
⁷ Id. at 9 (quoting Restatement (First) of Restitution §1, Comment e (1936)).
⁸ Id. (quoting Restatement (Third) of Restitution and Unjust Enrichment, §3, Reporter’s Note a (2010)).
⁹ Id. at 11.
¹⁰ Id.
¹¹ Id. at 11–12.
¹² Id.
¹³ Id. at 12.
¹⁴ Id. at 12–13.
¹⁵ Sripetch, No. 25-466, slip op. at 1–8 (Thomas, J., concurring). 
¹⁶ Id. at 6, 8.
¹⁷ Id. at 7, 10.
¹⁸ SEC v. Jarkesy, 603 U.S. 109, 123–25 (2024).

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Jim Bowman, an O’Melveny partner licensed to practice law in California; Mark A. Racanelli, an O’Melveny partner licensed to practice law in New York; Sharon M. Bunzel, an O’Melveny partner licensed to practice law in California; Lindsey Greer Dotson, an O'Melveny partner licensed to practice law in California; Andrew J. Geist, an O’Melveny partner licensed to practice law in New York; Mia N. Gonzalez, an O’Melveny partner licensed to practice law in New York; Michele W. Layne, an O’Melveny of counsel licensed to practice law in California; Rebecca Mermelstein, an O’Melveny partner licensed to practice law in New York and New Jersey; Benjamin D. Singer, an O'Melveny partner licensed to practice law in the District of Columbia and New York; Waqas A. Akmal, an O’Melveny counsel licensed to practice law in California; Lauren Casale, an O’Melveny counsel licensed to practice law in New York; Kathleen Gould, an O’Melveny counsel licensed to practice law in New York; Elizabeth Marley, an O'Melveny associate licensed to practice law in New York; and Faustino S. Galante, an O'Melveny associate licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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