The Equity Facade of SEC Disgorgement
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THE EQUITY FACADE OF SEC DISGORGEMENT
Russel/l7. -Ryan*
In its civil law enforcement cases under the federal securities laws, the Securities
and Exchange Commission (SEC) routinely seeks disgorgement of ill-gotten gains, and
courts routinely grant it.' The SEC commonly describes disgorgement as an equitable
remedy,2 and courts similarly begin their disgorgement analyses by assuming as axio-
matic the equitable nature of disgorgement.3
* Russell G. Ryan, a former Assistant Director of the SEC's Division of Enforcement, is a partner in
the Washington, D.C., office of King & Spalding LLP. Mr. Ryan represented the petitioner in Cahill v.
SEC, 133 S. Ct. 28 (2012) (denying certiorari), and in related proceedings in the lower courts, certain
opinions from which are cited in this Article.
1 The Securities and Exchange Commission (SEC) has secured more than $1.8 billion in aggregate
disgorgement orders in each of its four most recent fiscal years-far more than the agency has been
awarded in statutory penalties over the same period. See SECS. & ExCH. COMM'N, Select SEC and Market
Data, Fiscal 2012, 2 tbl. 1, available at www.sec.gov/about/secstats20l2.pdf ($2.1 billion in
disgorgement and $1 billion in penalties); SECS. & ExCH. COMM'N, Select SEC and Market Data, Fiscal
2011, 2 tbl. 1, available at www.sec.gov/about/secstats20l 1.pdf ($1.9 billion in disgorgement and $928
million in penalties); SECS. & ExCH. COMM'N, Select SEC and Market Data, Fiscal 2010, 2 tbl. 1,
available at www.sec.gov/about/secstats2010.pdf ($1.8 billion in disgorgement and $1 billion in
penalties); SECS. & EXCH. COMM'N, Select SEC and Market Data, Fiscal 2009, 2 tbl. 1, available at
www.sec.gov/about/secstats2009.pdf ($2.1 billion in disgorgement and $345 million in penalties).
2 As an example, in a recent case the SEC asserted this premise in the second sentence of the
argument section of its brief. Brief of the Secs. & Exch. Comm'n, Appellee at 15, SEC v. Whittemore,
659 F.3d 1 (D.C. Cir. 2011) (No. 10-5321) (quoting SEC v. First City Fin. Corp., 890 F.2d 1215, 1230
(D.C. Cir. 1989)). Similarly, in a report on disgorgement submitted by the agency to Congress, the second
sentence of the SEC's background discussion of disgorgement stated: Disgorgement is a well-
established, equitable remedy applied by federal district courts and is designed to deprive defendants of
'ill-gotten gains.' SECS. & ExCH. COMM'N, REPORT PURSUANT TO SECTION 308(C) OF THE SARBANES
OXLEY ACT OF 2002, 2-3 (2003) [hereinafter SEC Disgorgement Report], available at
www.sec.gov/news/studies/sox308creport.pdf.
' See infra notes 15 & 29 and accompanying text. A recent Lexis search of cases in which the SEC
was a named party and the opinion contained the exact phrase disgorgement is an equitable remedy
returned 81 hits. Moreover, this author's routine weekly electronic search and review of new court
opinions issued in SEC enforcement cases has revealed dozens of opinions each year in which courts
begin their disgorgement analysis with the assumed premise that disgorgement is equitable. For several](ViewImageLocal?handle=hein.journals/hblro4&div=2&collection=&method=preview&ext=.png&size=3)
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The Equity Facade of SEC Disgorgement
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