Ashwin J. Ram Authored “The Supreme Court Could Defang the SEC’s Most Powerful Remedy,” Published in Bloomberg Law

Summary of an article by Ashwin J. Ram, Partner, Buchalter LLP

In Sripetch v. SEC, No. 25-466, the Supreme Court took up whether the SEC must show investor pecuniary harm to obtain disgorgement. This article was written before the Court ruled, ahead of the April 20, 2026, argument. In it, Ashwin J. Ram explains the circuit split and why the answer matters most in cases with profits but no identifiable victims, such as insider trading.

Update: The Court decided Sripetch on June 4, 2026. In a unanimous opinion by Justice Gorsuch, it held that the SEC does not have to prove investors lost money to obtain disgorgement. Ram analyzed the decision in What the SEC Gave Up to Win Its Supreme Court Disgorgement Case (Bloomberg Law, June 9, 2026), summarized next.

The appeals courts split on whether harm is required

In SEC v. Govil, the Second Circuit required proof of pecuniary harm, reasoning that equity has always demanded an actual injury. In Sripetch, the Ninth Circuit rejected that rule in a case involving pump-and-dump and scalping schemes in microcap stocks. It read the 2021 amendments to Section 21(d) of the Exchange Act as authorizing disgorgement without any harm condition. The First Circuit reached the same conclusion.

Insider trading shows what is at stake

The issue matters most where a violation produced profits but no quantifiable loss to an identifiable investor. Insider trading is the classic example, because counterparties would have traded anyway and did not fund the insider’s profit. Under the Second Circuit’s rule, the SEC would need to quantify that harm, a difficult task in many cases and impossible in some. Market manipulation, registration, books-and-records, and accounting fraud cases raise the same tension.

The dispute turns on what Congress did after Liu

In Liu v. SEC (2020), the Court limited disgorgement to net profits and required that the funds go to victims. Congress then amended Section 21(d) in 2021 to expressly authorize disgorgement in federal court, but the legislative history says little about Liu‘s limits. The SEC argued that the amendments created a statutory remedy free of equitable requirements such as pecuniary harm. Sripetch argued that they merely clarified the law and left courts free to demand proof of harm.

The article flagged a penalty question for argument

The article named the key signal to watch at argument. That was whether the Justices would read the 2021 amendments as an unqualified grant of statutory authority or as a codification preserving Liu‘s guardrails. It also flagged questions about what separates no-harm disgorgement from a penalty and whether the Eighth Amendment’s Excessive Fines Clause would then apply.

What to do now

• Account for the decision. The Court sided with the SEC on pecuniary harm, so no-harm disgorgement is available. Ram’s June 9 follow-up covers the limits the opinion left open.
• Assess disgorgement exposure in open matters. Flag cases where the client profited without any traceable investor loss, such as insider trading or manipulation matters.
• Treat disgorgement as a central settlement term. Disgorgement and prejudgment interest topped $6 billion in fiscal year 2024, nearly three-quarters of the SEC’s financial remedies.

Originally published in Bloomberg Law in April 2026. Read the full article.