PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 18-1242

____________

SECURITIES AND EXCHANGE COMMISSION,

Appellant

v.

GUY GENTILE

____________

On Appeal from the United States District Court 

for the District of New Jersey

(D.C. No. 2:16-cv-01619)

District Judge: Honorable Jose L. Linares

____________

Argued November 6, 2018

Before: HARDIMAN, KRAUSE, and GREENBERG, Circuit 

Judges.

(Opinion Filed: September 26, 2019)

Daniel Staroselsky [Argued]

Sarah Prins

United States Securities & Exchange Commission 

100 F Street, N.E.
2

Washington, D.C. 20549

Counsel for Appellant

Adam C. Ford [Argued] 

Ford O’Brien LLP

575 Fifth Avenue

17th Floor

New York, NY 10017

Counsel for Appellee

___________

OPINION OF THE COURT

___________

HARDIMAN, Circuit Judge.

A five-year statute of limitations applies to any “action, 

suit or proceeding for the enforcement of any civil fine, 

penalty, or forfeiture, pecuniary or otherwise.” 28 U.S.C. 

§ 2462. In Kokesh v. SEC, 137 S. Ct. 1635 (2017), the Supreme 

Court held that “[d]isgorgement in the securities-enforcement 

context” is a “penalty” subject to that five-year limitations 

period. Id. at 1639. At issue in this appeal are two different 

remedies sought by the SEC: an injunction against further 

violations of certain securities laws and an injunction barring 

participation in the penny stock industry. The District Court 

held that those remedies—like the disgorgement remedy at 

issue in Kokesh—were penalties. We see these questions of 

first impression differently and hold that because 15 U.S.C. 

§ 78u(d) does not permit the issuance of punitive injunctions, 

the injunctions at issue do not fall within the reach of § 2462. 

We will vacate the District Court’s order dismissing the 

Commission’s enforcement action and remand the case for the 
3

District Court to decide whether the injunctions sought are 

permitted under § 78u(d).

I

1

Appellant Guy Gentile, the owner of an upstate New 

York broker-dealer, was involved in two pump-and-dump 

schemes to manipulate penny stocks2from 2007 to 2008. In 

both schemes, Gentile promoted and “manipulated the market 

for . . . stock by placing trades and trade orders that created the 

false appearance of liquidity, market depth, and demand for the 

stock.” Am. Compl. ¶ 3, No. 2:16-cv-01619 (D.N.J. Oct. 6, 

2017), ECF No. 47 (Complaint); see id. ¶ 7.

 

1 The District Court had jurisdiction under sections

20(b) and 22(a) of the Securities Act (15 U.S.C. §§ 77t(b) and 

77v(a)), sections 21(d) and 27 of the Exchange Act (15 U.S.C. 

§§ 78u(d) and 78aa), and 28 U.S.C. § 1331. We have

jurisdiction under 28 U.S.C. § 1291. We review de novo the 

District Court’s order granting a motion to dismiss under 

Federal Rule of Civil Procedure 12(b)(6). Mayer v. Belichick, 

605 F.3d 223, 229 (3d Cir. 2010). We accept the Commission’s 

well-pleaded allegations as true, construe them in the light 

most favorable to the Commission, and draw all reasonable 

inferences from those allegations in the Commission’s favor. 

Davis v. Wells Fargo, 824 F.3d 333, 341, 351 (3d Cir. 2016).

2

“Penny stocks are low-priced, high-risk equity 

securities for which there is frequently no well-developed 

market.” Newton v. Merrill Lynch, Pierce, Fenner & Smith, 

Inc., 259 F.3d 154, 175 n.14 (3d Cir. 2001), as amended (Oct. 

16, 2001) (quoting Hoxworth v. Blinder, Robinson & Co., 980 

F.2d 912, 914 n.1 (3d Cir. 1992)).
4

The United States Attorney’s Office for the District of 

New Jersey filed a sealed criminal complaint against Gentile 

in June 2012 and he was arrested a few weeks later. Gentile 

agreed to cooperate against his confederates, but the deal fell 

apart in 2016 after the Government rejected Gentile’s demand 

for a non-felony disposition. United States v. Gentile, 235 F. 

Supp. 3d 649, 651 (D.N.J. 2017). A grand jury indicted Gentile, 

but the District Court dismissed the indictment as untimely. Id.

at 656.

Gentile “maintains an active presence in the securities 

industry” as the CEO of a Bahamas-based brokerage and the 

beneficial owner of a broker-dealer. Compl. ¶ 82. Since his 

criminal charges were dismissed, he has expressed an intention 

to expand that brokerage and hire new employees. Id. ¶ 14 

(alleging Gentile announced plans to “increas[e] staff by 60 to 

80 employees by year-end 2017, target[] 30 per cent growth, 

and reactivat[e] ‘stalled’ expansion plans”). And he has been 

quite candid about his view of the Commission’s enforcement

action. He called it a “witch hunt,” and stated in the news and 

on social media that he “did nothing wrong” and “never 

scammed anyone.” Id. ¶ 80.

The Commission disagrees. In this civil enforcement 

action, filed eight years after Gentile’s involvement in the 

second scheme, it alleges violations of several provisions of the 

Securities and Exchange Acts.3It initially sought: (1) an 

 

3 Section 5(a) and 5(c) of the Securities Act, 15 U.S.C. 

§ 77e(a), (c); section 17(b) of the Securities Act, 15 U.S.C. 

§ 77q(b); section 17(a) of the Securities Act, 15 U.S.C. 

§ 77q(a); and section 10(b) of the Exchange Act, 15 U.S.C. 

§ 78j(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5.
5

injunction prohibiting Gentile from violating those provisions 

in the future; (2) disgorgement of wrongful profits; (3) civil 

money penalties; and (4) an order barring him from the penny 

stock industry. Following Kokesh, the Commission dropped its 

requests for disgorgement and penalties. That left only its

requests for an “obey-the-law” injunction and a prohibition on 

Gentile’s participation in penny-stock offerings. SEC v. 

Gentile, No. 2:16-cv-01619, 2017 WL 6371301, at *1 (D.N.J. 

Dec. 13, 2017).

The District Court granted Gentile’s motion to dismiss.

Id. at *4. Applying Kokesh, the Court found that the remedies 

the Commission sought were penalties under § 2462. Id. at *3–

4. And because Gentile’s illegal activity ceased in 2008, id. at 

*1, the Court dismissed the case as untimely.

In holding the obey-the-law injunction was a penalty, 

the Court first noted that the injunction would not require 

Gentile to do anything the public at large is not already obliged 

to do, but it would stigmatize him. Nor would the injunction 

restore the status quo ante or compensate any victim of 

Gentile’s schemes. Similarly, the Court found the penny stock 

bar would punish Gentile by “restrict[ing] [his] business 

structure and methodology, in perpetuity,” without benefitting 

any victim or remediating the schemes’ effects. Id. at *4.

Though it “underst[ood] [the Commission’s] desire to protect 

the public from predatory conduct,” the Court could not

conclude “that, under the limited set of facts currently before 

it, the requested injunctions are anything more than a penalty.” 

Id. The Commission filed this appeal. 
6

II

The default federal statute of limitations requires that

“an action, suit or proceeding for the enforcement of any civil 

fine, penalty, or forfeiture, pecuniary or otherwise,” be brought 

within five years of the claim’s accrual. 28 U.S.C. § 2462. In 

Kokesh, the Supreme Court held disgorgement, “as it is applied 

in SEC enforcement proceedings, operates as a penalty under

§ 2462.” 137 S. Ct. at 1645. The Court defined a “penalty” as

a “punishment, whether corporal or pecuniary, imposed and 

enforced by the State, for a crime or offen[s]e against its laws.”

Id. at 1642 (alteration in original) (quoting Huntington v. 

Attrill, 146 U.S. 657, 667 (1892)). The Court’s definition of 

“penalty” was informed by two principles. First, whether a 

sanction is a penalty turns in part on whether the wrongdoing

it targets was perpetrated against the public, rather than an 

individual. Id. Second, “a pecuniary sanction operates as a 

penalty only if it is sought ‘for the purpose of punishment, and 

to deter others from offending in like manner’—as opposed to 

compensating a victim for his loss.” Id. (quoting Huntington, 

146 U.S. at 668).

The Court held SEC disgorgement “readily” satisfies 

these criteria because (1) it is imposed for violations of public 

laws; (2) it is imposed for punitive purposes; and (3) in many 

cases the disgorged money is not used to compensate victims. 

Id. at 1643–44. The Commission protested that disgorgement 

sometimes does compensate victims, but the Court was 

unpersuaded. While “sanctions frequently serve more than one 

purpose,” a “civil sanction that cannot fairly be said solely to 

serve a remedial purpose, but rather can only be explained as 

also serving either retributive or deterrent purposes, is 

punishment.” Id. at 1645 (quoting Austin v. United States, 509 

U.S. 602, 610, 621 (1993)).
7

According to Gentile, the Supreme Court’s definition of 

“penalty” applies equally to injunctions prohibiting future 

lawbreaking and participation in penny stock offerings. There 

is no question the Commission’s action is to enforce what 

Kokesh described as “public laws.” Id. at 1643; see SEC v. Teo, 

746 F.3d 90, 101–02 (3d Cir. 2014). So this case turns on 

whether the remedies the Commission seeks are imposed for 

punitive reasons.

III

Both remedies are found in 15 U.S.C. § 78u(d).4 The 

Commission’s general authority to seek injunctions against 

ongoing or threatened violations, § 78u(d)(1), states:

Whenever it shall appear to the Commission that 

any person is engaged or is about to engage in 

acts or practices constituting a violation of any 

provision of this chapter, [or] the rules or 

regulations thereunder . . . it may in its discretion 

bring an action in [district court] to enjoin such 

acts or practices, and upon a proper showing a 

permanent or temporary injunction or restraining 

order shall be granted without bond.

 

4 The Commission has parallel injunction and pennystock bar authority under the Securities Act. See 15 U.S.C. 

§ 77t(b), (g). Those provisions are materially indistinguishable 

from the Exchange Act provisions we set forth below, and our 

analysis applies equally to them. 
8

Section 78u(d)(1) injunctions that simply reference or restate 

the text of statutory prohibitions are called “obey-the-law”

injunctions.

The Commission’s authority to seek a penny-stock 

industry bar is found in § 78u(d)(6)(A): 

In any proceeding under paragraph (1) against 

any person participating in, or, at the time of the 

alleged misconduct who was participating in, an 

offering of penny stock, the court may prohibit 

that person from participating in an offering of 

penny stock, conditionally or unconditionally, 

and permanently or for such period of time as the 

court shall determine.

Paragraph (6) does not use the word “enjoin” like paragraph 

(1) does, so first we must determine whether § 78u(d)(6) 

penny-stock industry bars are a species of injunction. Several 

considerations convince us they are. 

First, take the text. Section 78u(d)(6) authorizes a court 

to “prohibit” a defendant from participating in penny stock 

offerings. Just like a typical injunction, this is a judicial order 

“to refrain from doing a particular thing . . . . which operates as 

a restraint upon the party in the exercise of his real or supposed 

rights.” 2 Joseph Story, Commentaries on Equity

Jurisprudence § 861, at 154 (1836). It is “wholly preventive, 

prohibitory, or protective,” 4 John Norton Pomeroy, A Treatise 

on Equity Jurisprudence § 1337, at 3206 (4th ed. 1919), and it 

“directs the conduct of a party . . . with the backing of [the 

court’s] full coercive powers.” Nken v. Holder, 556 U.S. 418, 

428 (2009) (quoting Weinberger v. Romero-Barcelo, 456 U.S. 

305, 312 (1982)).
9

The statute’s structure also suggests the penny stock bar 

is injunctive. It is only “in a[] proceeding [for an injunction

under § 78u(d)(1)]” that the statute empowers courts to issue 

the bar. Consistent with that close relation, courts use similar

factors to decide whether to issue both industry bars and obeythe-law injunctions. See SEC v. Kahlon, 873 F.3d 500, 506–07 

(5th Cir. 2017) (per curiam). Compare SEC v. Bonastia, 614 

F.2d 908, 912 (3d Cir. 1980), with SEC v. Patel, 61 F.3d 137, 

141 (2d Cir. 1995). And paragraph (6), like paragraph (1), 

bespeaks equitable discretion. See 15 U.S.C. § 78u(d)(6)(A)

(“[T]he court may prohibit that person from participating in an 

offering of penny stock, conditionally or unconditionally, and 

permanently or for such period of time as the court shall 

determine.” (emphases added)). Because it can be sought only

“[i]n a[] proceeding under paragraph (1),” id., a district court 

may impose a penny stock bar only “upon a proper showing,”

id. § 78u(d)(1). Thus, like paragraph (1), paragraph (6)

contemplates injunctive relief’s “nice adjustment and 

reconciliation between the public interest and private needs,” 

Aaron v. SEC, 446 U.S. 680, 701 (1980) (quoting Hecht Co. v. 

Bowles, 321 U.S. 321, 329 (1944)).

Finally, at least two courts of appeals have 

acknowledged that these court-ordered industry bars are 

injunctive. See Kahlon, 873 F.3d at 508 (penny stock bar); 

Patel, 61 F.3d at 141 (director-and-officer bar). That makes 

sense, since courts have also reasoned that the statutory D&O 

bar authority merely codifies courts’ preexisting power to 

include these bars in injunctions. See SEC v. First Pac. 

Bancorp, 142 F.3d 1186, 1193 & n.8 (9th Cir. 1998); SEC v. 

Posner, 16 F.3d 520, 521 (2d Cir. 1994). For all these reasons, 

we hold § 78u(d)(6) penny-stock industry bars are injunctive

in nature.
10

IV

We next consider the question whether properly issued 

and framed § 78u(d)(1) and (6) injunctions can be penalties 

subject to the statute of limitations. We look first to the 

equitable principles governing injunctions, before turning to 

the text and history of the Commission’s authority to seek 

them. 

A

The federal courts’ equity jurisdiction mirrors that of the

High Court of Chancery in England in 1789, when Congress 

passed the first Judiciary Act. Grupo Mexicano de Desarrollo,

S.A. v. All. Bond Fund, Inc., 527 U.S. 308, 318 (1999). This 

does not mean, however, that equitable relief is strictly a 

common law matter. Innumerable acts of Congress explicitly

provide for injunctions, and courts must account for the policy 

judgments exemplified by those statutes when exercising their 

equitable discretion. See Hecht, 321 U.S. at 331. But unless 

Congress clearly states an intention to the contrary, statutory

injunctions are governed by the same “established principles” 

of equity that have developed over centuries of practice. 

Weinberger, 456 U.S. at 313; see eBay Inc. v. MercExchange, 

L.L.C., 547 U.S. 388, 391 (2006); Hecht, 321 U.S. at 329. This

clear statement rule applies to regulatory statutes enforced by 

government agencies. Hecht, 321 U.S. at 329–30.

Gentile’s argument that SEC injunctions are penalties, 

even when properly issued and framed, runs headlong into a 

core tenet of equity jurisprudence. “The historic injunctive 

process was designed to deter, not to punish.” Hecht, 321 U.S. 

at 329. Or as one treatise put it, a court may not by injunction 

“interfere for purposes of punishment, or . . . compel persons 
11

to do right” but may only “prevent them from doing wrong.” 

1 James L. High, A Treatise on the Law of Injunctions § 1, at 3

(4th ed. 1905). This principle is a corollary to the most basic 

rule of preventive injunctive relief—that the plaintiff must 

show a cognizable risk of future harm. See United States v. Or.

State Med. Soc’y, 343 U.S. 326, 333 (1952).

Besides being an element of Article III standing for 

prospective relief, the need to show risk of harm is also a 

traditional equitable requirement that applies to enforcement 

agencies pursuing statutory injunctions. See United States v. W. 

T. Grant Co., 345 U.S. 629, 633 (1953); Douglas Laycock, 

Modern American Remedies 278 (4th ed. 2010); Gene R. 

Shreve, Federal Injunctions and the Public Interest, 51 Geo. 

Wash. L. Rev. 382, 405 (1983). Unless the agency shows a real 

threat of future harm, “there is in fact no lawful purpose to be 

served” by a preventive injunction. SEC v. Torr, 87 F.2d 446, 

450 (2d Cir. 1937).

In Kokesh’s parlance, a preventive injunction 

unsupported by that showing could not “fairly be said solely to 

serve a remedial purpose,” 137 S. Ct. at 1645 (quoting Austin, 

509 U.S. at 621). Cf. Conmar Prods. Corp. v. Universal Slide 

Fastener Co., 172 F.2d 150, 155–56 (2d Cir. 1949) (L. Hand, 

C.J.) (rejecting injunction that would not prevent harm and so 

“must rest upon the theory that it is a proper penalty for the 

[defendant’s] wrong” because “we can find no support [for the 

injunction] in principle”). But a properly issued and framed 

injunction is “fairly” so described, because its “sole function

. . . is to forestall future violations.” Or. State Med. Soc’y, 343 

U.S. at 333. We think this prevention principle most sharply 

distinguishes SEC injunctions from the disgorgement remedy 

at issue in Kokesh. See SEC v. Commonwealth Chem. Sec., Inc., 

574 F.2d 90, 103 n.13 (2d Cir. 1978) (Friendly, J.) (holding that 
12

even if the Commission fails “to show the likelihood of 

recurrence required to justify an injunction,” courts may still 

impose disgorgement); Jayne W. Barnard, The SEC’s 

Suspension and Bar Powers in Perspective, 76 Tul. L. Rev. 

1253, 1258 (2002) (“All of these [SEC] injunctions except the 

disgorgement injunction depend on the government’s ability to 

demonstrate that, in the absence of an injunction, there is a 

reasonable likelihood of future violations.”). In short, 

injunctions may properly issue only to prevent harm—not to 

punish the defendant.

B

As we have explained, Congress must provide a clear 

statement to substantially depart from traditional equitable 

principles like that one. See Hecht, 321 U.S. at 329 (“We 

cannot but think that if Congress had intended to make such a 

drastic departure from the traditions of equity practice, an 

unequivocal statement of its purpose would have been made.”).

We perceive no such intent in the text of § 78u(d)(1) and (6). 

And while this clear statement rule might suffice to decide the 

case, requiring all injunctions under § 78u(d)(1) and (6) to be 

preventive and thus bringing them out of the realm of penalties, 

we are mindful that the Kokesh Court analyzed how SEC 

disgorgement operates in practice.5 So we also analyze the

history and caselaw surrounding these provisions. That

analysis reinforces our conclusion but also impels us to 

 

5 The disgorgement remedy addressed in Kokesh was 

not created by statute, see 137 S. Ct. at 1640, so there would 

have been nowhere to look for a clear statement of 

congressional intent to deviate from traditional equitable 

principles. See infra Part IV(B)(2).
13

reinforce the parameters within which an SEC injunction is 

properly issued and framed.

1

Once again, we start with the text. When the 

Commission believes a person “is engaged or is about to 

engage” in securities violations, it may bring a suit “to enjoin 

such acts or practices, and upon a proper showing a permanent 

or temporary injunction or restraining order shall be granted 

without bond.” 15 U.S.C. § 78u(d)(1). If the suit is against a 

“person participating in, or, at the time of the alleged 

misconduct who was participating in, an offering of penny 

stock” and a “proper showing” has been made as to likelihood 

of future harm, the court may also “prohibit that person from 

participating in an offering of penny stock, conditionally or 

unconditionally, and permanently or for such period of time as 

the court shall determine.” Id. § 78u(d)(1), (6)(A).

Nothing in either provision just quoted suggests 

Congress meant to depart from the rule that injunctions are 

issued to prevent harm rather than to punish past wrongdoing. 

Neither provision mentions retribution or general deterrence.

See Kokesh, 137 S. Ct. at 1645; cf. Tull v. United States, 481 

U.S. 412, 423 (1987) (“[A provision’s] authorization of 

punishment to further retribution and deterrence clearly 

evidences that [it] reflects more than a concern to provide 

equitable relief.”). Neither shows an intent—let alone a clear 

intent—that injunctions should issue automatically on a 

finding of past violations or without a proper showing of the 

likelihood of future harm. Each uses open-ended language that 

suggests traditional equitable discretion. Compare 15 U.S.C. 

§ 78u(d)(1) (“[U]pon a proper showing . . . .”), and id. 

§ 78u(d)(6)(A) (“[T]he court may prohibit that person from 
14

participating in an offering of penny stock, conditionally or 

unconditionally, and permanently or for such period of time as 

the court shall determine.” (emphases added)), with Hecht, 321 

U.S. at 321–22, 329–30 (holding no clear intent to strip 

traditional discretion in statute that provided that an injunction 

or other order “shall be granted” “upon a showing . . . that [the 

defendant] has engaged or is about to engage in [prohibited]

acts or practices”), and id. at 327 (noting distinction between 

“shall be granted” language and statutes, like § 78u(d)(1), that 

“provide that an injunction or restraining order shall be granted 

‘upon a proper showing’” (citations omitted)). In sum, 

“[a]bsent much clearer language than is found in the [Exchange 

Act], the entitlement of a plaintiff to an injunction thereunder 

remains subject to principles of equitable discretion.” SEC v. 

Tex. Gulf Sulphur Co., 401 F.2d 833, 868–69 (2d Cir. 1968) (en 

banc) (Friendly, J., concurring).

2

The history of the Commission’s injunction authority 

leads to the same conclusion. “Prior to the labor injunctions of 

the late 1800’s, injunctions were issued primarily in relatively 

narrow disputes over property.” Int’l Union, United Mine 

Workers of Am. v. Bagwell, 512 U.S. 821, 842 (1994) (Scalia, 

J., concurring). But that changed as more and more conduct 

came to be regulated by injunction through a rough analogy to 

public nuisance. See Comment, The Statutory Injunction as an 

Enforcement Weapon of Federal Agencies, 57 Yale L.J. 1023, 

1024 n.5 (1948). Securities enforcement injunctions emerged 

as part of this expansion of American equity jurisprudence into 

public law enforcement. See Daniel J. Morrissey, SEC 

Injunctions, 68 Tenn. L. Rev. 427, 437–39 (2001).
15

Before Congress created the SEC, states authorized 

injunctive enforcement of laws that targeted “speculative 

schemes which have no more basis than so many feet of ‘blue 

sky,’” Hall v. Geiger-Jones Co., 242 U.S. 539, 550 (1917). Part 

of a new breed of statutory remedy, these injunctions were an 

extension of traditional equity “even less directly traceable to 

the remedial devices fashioned by the common law” than 

previous remedies that had “f[ound] a basic analogy in the 

common-law right of the state to abate and restrain public 

nuisances.” Note, Statutory Extension of Injunctive Law 

Enforcement, 45 Harv. L. Rev. 1096, 1097, 1099 (1932). Those 

predecessor nuisance actions distinguished punishment from 

prevention. See Eilenbecker v. Dist. Court of Plymouth Cty., 

134 U.S. 31, 40 (1890) (“[I]t seems to us to be quite as wise to 

use the processes of the law and the powers of the court to 

prevent the evil, as to punish the offence as a crime after it has 

been committed.”), overruled in part on other grounds by

Bloom v. Illinois, 391 U.S. 194 (1968); Mugler v. Kansas, 123 

U.S. 623, 672–73 (1887) (“In case of public nuisances, 

properly so called, an indictment lies to abate them, and to 

punish the offenders. But an information, also, lies in equity to 

redress the grievance by way of injunction.” (quoting 2 Story, 

supra, §§ 921–922)). And while statutory injunctions aimed at 

fraud on the public were an innovation, they too respected this 

fundamental distinction. 

New York’s Martin Act is perhaps the best-known 

example. That blue sky law empowered the state attorney 

general to seek information and commence actions in equity or 

criminal prosecutions. See Dunham v. Ottinger, 154 N.E. 298, 

300 (N.Y. 1926). Injunction actions were meant to “stop[]” or 

“prevent” threatened violations, id., while prosecutions were 

meant to “punish” them. Id. Other states sought to use the 
16

injunctive process to “stop” and “suppress” securities fraud.

E.g., Stevens v. Washington Loan Co., 152 A. 20, 23 (N.J. Ch. 

1930). Then, responding to the 1929 stock market crash and 

the Great Depression, Congress entered the fray. See SEC v. 

Capital Gains Research Bureau, Inc., 375 U.S. 180, 186 

(1963). It enacted first the Securities Act of 1933 and then the 

Securities Exchange Act of 1934, which created the SEC.

At first the Commission had only one arrow in its 

quiver: injunctions against future violations of the securities 

laws.6 See Kokesh, 137 S. Ct. at 1640. Much like those 

authorized by blue sky laws, SEC injunctions were “a classic 

example of modern utilization of traditional equity jurisdiction 

for the enforcement of a congressionally declared public policy 

administered by a regulatory agency established for that 

purpose.” SEC v. Advance Growth Capital Corp., 470 F.2d 40, 

53 (7th Cir. 1972). For a time, courts were too quick to issue 

injunctions on modest showings of threatened harm. See 

Commonwealth Chem., 574 F.2d at 99 (“It is fair to say that the 

current judicial attitude toward the issuance of injunctions on 

the basis of past violations at the SEC’s request has become 

more circumspect than in earlier days.”). But spurred by 

renewed attention to the statute’s text and the harsh 

consequences of SEC injunctions, courts began taking a harder 

 

6 Decades later, Congress granted the authority to seek 

penny stock bars. That authority came in 1990 as part of an 

amendment to the Exchange Act designed “to provide 

additional enforcement remedies for violations of [the 

securities] laws and to eliminate abuses in transactions in 

penny stocks, and for other purposes.” Securities Enforcement 

Remedies and Penny Stock Reform Act of 1990, Pub. L. No.

101-429, 104 Stat. 931, 931 pmbl.
17

look at whether violators posed a real threat of recidivism. See 

id. at 99–100 (collecting cases).

Citing Commonwealth Chemical with approval, the 

Supreme Court said of SEC injunctions that “the proper 

exercise of equitable discretion is necessary to ensure a ‘nice 

adjustment and reconciliation between the public interest and 

private needs.’” Aaron, 446 U.S. at 701 (quoting Hecht, 321 

U.S. at 329). To merit an injunction based on threatened harm,

“the Commission must establish a sufficient evidentiary 

predicate to show that such future violation may occur.” Id. Our 

Court makes that determination based on factors including not 

merely the fact of a past violation, but more importantly “the 

degree of scienter involved [in the past violation], the isolated 

or recurrent nature of the infraction, the defendant’s 

recognition of the wrongful nature of his conduct, [and] the 

sincerity of his assurances against future violations.” Bonastia, 

614 F.2d at 912.

Moreover, “in deciding whether to grant injunctive 

relief, a district court is called upon to assess all those 

considerations of fairness that have been the traditional 

concern of equity courts.” SEC v. Manor Nursing Ctrs., Inc., 

458 F.2d 1082, 1102 (2d Cir. 1972) (citing Hecht, 321 U.S. at 

328–30). Those considerations include not only the need to 

protect the public where the circumstances of the offense and 

of the offender give rise to a substantial risk of future harm, 

Bonastia, 614 F.2d at 912, but also the stigma, humiliation, and 

loss of livelihood attendant to the imposition of the two 

injunctions sought here, whether temporary or permanent. So

“the adverse effect of an injunction upon defendants is a factor 

to be considered by the district court in exercising its 

discretion.” Manor Nursing Ctrs., 458 F.2d at 1102; see Aaron,

446 U.S. at 703 (Burger, C.J., concurring) (“An [SEC] 
18

injunction is a drastic remedy, not a mild prophylactic, and 

should not be obtained against one acting in good faith.”); SEC 

v. Warren, 583 F.2d 115, 122 (3d Cir. 1978) (weighing hardship 

to defendant in approving injunction’s dissolution). In other 

words, the harsh effects of an SEC injunction demand that it

not be imposed lightly or as a matter of course, that it be 

imposed only upon a meaningful showing of necessity, and 

when it is imposed, that it be as short and narrow as reasonably

possible.

These principles would be dishonored if courts aimed to 

inflict hardship instead of tailoring injunctions to minimize it.

A preventive injunction must be justified by a substantial 

showing of threatened harm, assuring the court that the 

opprobrium and other collateral consequences that accompany

it are outweighed by a demonstrated public need; retribution is 

not a proper consideration to support this showing. See 

Hartford-Empire Co. v. United States, 323 U.S. 386, 433–35

(1945) (striking part of antitrust injunction applicable to 

directors and officers who, though they “may have rendered 

themselves liable to prosecution,” had not been shown to pose 

a threat of future violations), supplemented, 324 U.S. 570. As 

the Court of Appeals for the D.C. Circuit aptly explained, 

“[j]ustifying an injunction, even in part, in terms of propitiating 

public sentiment, is objectionable as a matter of law.” SEC v. 

First City Fin. Corp., 890 F.2d 1215, 1229 (D.C. Cir. 1989). 

Nor is general deterrence a proper consideration. See Arthur 

Lipper Corp. v. SEC, 547 F.2d 171, 180 n.6 (2d Cir. 1976) 

(Friendly, J.) (distinguishing “injunctive proceedings, the 

objective of which is solely to prevent threatened future harm” 

from administrative sanctions used “not so much to control the 

respondent as to warn others . . . [which] has a significant 
19

‘penal’ component” (quoting Louis L. Jaffe, Judicial Control 

of Administrative Action 267–68 (1965))).

And the principle that injunctions may issue only “to 

prevent threatened future harm,” not to punish, Arthur Lipper, 

547 F.2d at 180 n.6, applies equally to an injunction’s scope. 

See SEC v. Am. Bd. of Trade, Inc., 751 F.2d 529, 542–43 (2d 

Cir. 1984) (Friendly, J.). Just as it is error to issue an injunction 

for punishment’s sake, it is error to broaden the scope of an 

injunction because of moral desert or to make an example of 

the defendant. That principle is implicit in the well-established 

rule that “injunctive relief should be no more burdensome to 

the defendant than necessary to provide complete relief to the 

plaintiff[].” Madsen v. Women’s Health Ctr., Inc., 512 U.S. 753, 

765 (1994) (quoting Califano v. Yamasaki, 442 U.S. 682, 702 

(1979)).

Indeed, rather than using punishment to justify SEC 

injunctions, courts must shape those injunctions to provide full 

relief without inflicting unnecessary pain. See, e.g., Patel, 61 

F.3d at 142 (“The loss of livelihood and the stigma attached to 

permanent exclusion from the corporate suite certainly requires 

more.”); Am. Bd. of Trade, 751 F.2d at 542–43. And courts 

have consistently explained that SEC injunctions must be 

intended to deter the violator from further infractions (and 

thereby protect the public), not punish past misconduct. See, 

e.g., Bonastia, 614 F.2d at 912; SEC v. Graham, 823 F.3d 1357, 

1361–62 (11th Cir. 2016); SEC v. Steadman, 967 F.2d 636, 648 

(D.C. Cir. 1992); SEC v. Savoy Indus., Inc., 587 F.2d 1149, 

1169 (D.C. Cir. 1978); SEC v. Geon Indus., Inc., 531 F.2d 39, 

54–56 (2d Cir. 1976) (Friendly, J.). Because an injunction must

be fully supported by threatened harm, we reject Gentile’s 

argument that a properly issued and framed SEC injunction can 

be a “penalty” as defined by Kokesh.
20

The SEC itself agrees with this approach in principle. In 

Saad, Exchange Act Release No. 86751, 2019 WL 3995968 

(Aug. 23, 2019), the Commission was asked to evaluate a 

disciplinary sanction barring an individual from associating 

with any FINRA member firm. Id. at *1. The Commission 

observed at the outset that “if a sanction is imposed for punitive 

purposes as opposed to remedial purposes, the sanction is 

excessive or oppressive and therefore impermissible.” Id. at *3. 

The Commission went on to explain that a reasonable, wellgrounded finding that the sanctioned party “posed a clear risk 

of future misconduct” such that “the bar was . . . necessary to 

protect investors” was what distinguished an “appropriatelyissued FINRA bar[]” from an impermissibly punitive bar. Id.

at *4 (internal quotation marks and citation omitted).

Conversely, “[a] sanction based solely on past misconduct . . . 

would be impermissibly punitive and thus excessive or 

oppressive.” Id. at *5. 

That an injunction is permissible only where necessary 

“to prevent . . . misconduct from occurring in the future,” and 

not merely “to punish past transgressions,” Saad, 2019 WL 

3995968, at *12, is a standard to which the SEC must also hold 

itself. When it does not, the buck stops here: Lest we return to 

those days when only a modest showing was considered 

sufficient, Commonwealth Chem., 574 F.2d at 99, federal 

courts may not grant SEC injunctions except “upon a proper 

showing” of the likelihood of future harm.7 

 

7 As we explain below, we perceive an important 

distinction between the statutorily authorized equitable relief 

at issue here and the administrative sanctions at issue in Saad. 

So we do not think all of the Saad Release’s reasoning is 
21

Other courts are divided on whether an injunction can 

ever be a § 2462 penalty. The Eleventh Circuit, bound by its 

precedent, held that injunctions cannot be penalties under 

§ 2462 because they are equitable. Graham, 823 F.3d at 1360. 

It went on to explain that even had that precedent not been 

established, it would hold § 2462 “does not apply to 

injunctions like the one in [that] case.” Id. The court reasoned 

that injunctive relief is forward looking, while penalties 

address past wrongdoing. See id. at 1361–62. By contrast, the 

Fifth Circuit held in a non-precedential opinion that SEC 

injunctions and D&O bars could be—and in that case were—

penalties under § 2462. SEC v. Bartek, 484 F. App’x 949, 957 

(5th Cir. 2012) (per curiam). The Eighth, Sixth, and Tenth 

Circuits declined to say whether injunctions can ever be § 2462 

penalties, instead holding the particular injunctions before 

them were not punitive. See SEC v. Collyard, 861 F.3d 760, 

764 (8th Cir. 2017); SEC v. Quinlan, 373 F. App’x 581, 587 

(6th Cir. 2010) (non-precedential); United States v. Telluride 

Co., 146 F.3d 1241, 1245–48 (10th Cir. 1998). The D.C.

Circuit has taken yet another approach in the agency context.

That court evaluates whether an administrative sanction

constitutes a penalty for purposes of § 2462 on a case-by-case 

basis, considering “the degree and extent of the consequences 

 

applicable to the injunction context. In particular, we do not 

believe that, under § 78u(d)(1) or (6), “general deterrence . . .

may be considered as part of the overall remedial inquiry.”

Saad, 2019 WL 3995968, at *2 (alteration in original) (quoting 

PAZ Sec., Inc. v. SEC, 494 F.3d 1059, 1066 (D.C. Cir. 2007)).
22

to the subject of the sanction.” Johnson v. SEC, 87 F.3d 484, 

488 (D.C. Cir. 1996).8 None of this is inconsistent with our 

holdings here; these courts simply have not decided the scope 

of injunctions permitted under § 78u(d).

In our view, the Graham court got it right. We have

deemed inappropriate an injunction that was the functional 

equivalent of a monetary penalty. United States v. EME Homer 

City Generation, LP, 727 F.3d 274, 295–96 (3d Cir. 2013)

(“Such injunctive cap-and-trade relief is the equivalent of 

awarding monetary relief and ‘could not reasonably be 

characterized as an injunction.’” (quoting United States v. 

Midwest Generation, 781 F. Supp. 2d 677, 685 (N.D. Ill.

2011))); see United States v. Luminant Generation Co., 905 

F.3d 874, 890–91 (5th Cir. 2018) (Elrod, J., concurring in part 

and dissenting in part) (advocating our Court’s approach in 

EME Homer City), reh’g en banc granted, 929 F.3d 316 (5th 

 

8 While we agree with the D.C. Circuit that 

considerations of both purpose and effect are relevant to 

whether an injunction constitutes a penalty, we believe these 

considerations bear on the authority of the district court to enter 

an SEC injunction, not on whether that injunction, while within 

the court’s power to grant, is nonetheless time barred. We 

question too the consistency and administrability of this 

approach, which appears to contemplate the imposition of both 

punitive and remedial injunctions within § 2462’s limitations 

period but of only remedial injunctions outside of it, with the 

time bar conclusively determined on appeal only after the fact. 

The approach we espouse today has the virtue of providing 

clear guidance ex ante by focusing instead on the SEC’s 

authority to seek and the court’s authority to impose an 

injunction under § 78u(d)(1) and (6). 
23

Cir. 2019); cf. Edelman v. Jordan, 415 U.S. 651, 668 (1974) 

(“While the Court of Appeals described this retroactive award 

of monetary relief as a form of ‘equitable restitution,’ it is in 

practical effect indistinguishable in many aspects from an 

award of damages against the State.”). A similar principle 

applies here. Injunctions may not be supported by the desire to 

punish the defendant or deter others, so courts abuse their 

discretion when they issue or broaden injunctions for those 

reasons. We therefore hold SEC injunctions that are properly 

issued and valid in scope are not penalties and thus are not 

governed by § 2462. If an injunction cannot be supported by a 

meaningful showing of actual risk of harm, it must be denied 

as a matter of equitable discretion—not held time barred by 

§ 2462. 

There is one puzzle we feel compelled to address. The 

Kokesh Court held SEC disgorgement is a penalty—despite the 

maxim that “[a] civil penalty was a type of remedy at common 

law that could only be enforced in courts of law,” Tull, 481 

U.S. at 421–22; see Decorative Stone Co. v. Bldg. Trades 

Council of Westchester Cty., 23 F.2d 426, 427–28 (2d Cir. 

1928) (“Courts of equity do not award as incidental relief 

damages penal in character without express statutory authority

. . . .”). If SEC disgorgement is both an equitable remedy and a 

§ 2462 penalty, could an injunction be both too?

We think not. First, unlike § 78u(d)(1) and (6)

injunctions, SEC disgorgement is not authorized by statute. It 

has instead been justified as part of courts’ “inherent equity 

power to grant relief ancillary to an injunction.” Kokesh, 137 

S. Ct. at 1640 (quoting SEC v. Tex. Gulf Sulphur Co., 312 F. 

Supp. 77, 91 (S.D.N.Y. 1970)). Without any textual basis, it is

hard to see where the Supreme Court would look for a clear 

statement of congressional intent to deviate from equitable 
24

traditions. Indeed, at the Kokesh oral argument several Justices 

expressed frustration that the lack of statutory text made it hard 

to define SEC disgorgement. See Transcript of Oral Argument 

at 7–9, 13, 31, 52, Kokesh, 137 S. Ct. 1635 (No. 16-529), 2017 

WL 1399509.

Second, the Hecht admonition—that “[t]he historic 

injunctive process was designed to deter, not to punish,” 321 

U.S. at 329—is at the core of preventive injunctive relief. By 

contrast, Tull spoke to equity more broadly. So 

notwithstanding what Kokesh might suggest about equitable 

relief in general, we do not believe it opens the door to punitive 

injunctions. 

Finally, though the Kokesh Court was careful to reserve 

the issue, see 137 S. Ct. at 1642 n.3, we note its skepticism that 

SEC disgorgement is applied in conformity with traditional 

equitable principles. Compare id. at 1640 (“Generally, 

disgorgement is a form of ‘[r]estitution measured by the 

defendant’s wrongful gain.’” (alteration in original) (quoting 

Restatement (Third) of Restitution and Unjust Enrichment § 51 

cmt. a, at 204 (Am. Law Inst. 2010))), with id. at 1644 (“[I]t is 

not clear that disgorgement, as courts have applied it in the 

SEC enforcement context, simply returns the defendant to the 

place he would have occupied had he not broken the law. SEC 

disgorgement sometimes exceeds the profits gained as a result 

of the violation.”). For these reasons, we conclude that proper 

injunctions do not fall within the definition of penalties as 

defined in Kokesh.

V

Our analysis to this point disposes of most of Gentile’s 

arguments, but a few remain. First, Gentile argues that the 
25

Hecht admonition—that “[t]he historic injunctive process was 

designed to deter, not to punish”—does not apply because it is 

inconsistent with Kokesh’s treatment of § 2462. That is, Hecht

sets forth a dichotomy—punishment versus deterrence—that is 

untenable because Kokesh holds deterrence is punitive. We 

think this overreads Kokesh. Though the Court referred several 

times to “deterrence” without elaboration, we understand those 

references to address general deterrence. See Kokesh, 137 S. 

Ct. at 1642 (“[A] pecuniary sanction operates as a penalty only 

if it is sought ‘for the purpose of punishment, and to deter 

others from offending in like manner’ . . . .” (quoting 

Huntington, 146 U.S. at 668)). Our Court’s gloss on Hecht

reflects this important distinction between restraining the 

defendant on fear of contempt and making an example of him

to deter others. See Bonastia, 614 F.2d at 912 (noting that 

injunctive relief serves “to deter [the violator] from 

committing future infractions of the securities laws,” not to 

“punish” him for past misconduct (emphasis added)). The 

former is the very point of preventive injunctive relief; the 

latter is punitive. “When it comes to discerning and applying 

[traditional equitable] standards . . . ‘a page of history is worth 

a volume of logic.’” eBay, 547 U.S. at 395 (Roberts, C.J., 

concurring) (quoting N.Y. Tr. Co. v. Eisner, 256 U.S. 345, 349 

(1921)). All the more so here—where Gentile’s logic is based 

on a strained reading of a single word in a case addressing a 

different remedy.

And unlike in Kokesh, there are few signs that courts 

issue SEC injunctions for general deterrence. True, there are 

isolated examples. See, e.g., Posner, 16 F.3d at 522 (“We 

intend our affirmance . . . as a sharp warning to those who 

violate the securities laws that they face precisely such 

banishment.”). But the caselaw in the main reflects the 
26

traditional principles we have discussed. We also find it 

significant that cases prior to Kokesh addressing both SEC 

injunctions and disgorgement often discuss general deterrence 

only with respect to the latter. See, e.g., SEC v. Kokesh, 834 

F.3d 1158, 1162–64 (10th Cir. 2016), rev’d, 137 S. Ct. 1635;

SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1474, 1477–78 

(2d Cir. 1996); First City Fin. Corp., 890 F.2d at 1228–29, 

1231–32; see also Collyard, 861 F.3d at 765. What is more, we 

have explained in an SEC case that “there is no great public or 

national interest to be served by an injunction in essence 

against a single individual.” Warren, 583 F.2d at 121. That 

would hardly be true if we sought to implement a program of 

general deterrence through injunctions.

Part of our disagreement with Gentile stems from his 

focus on the Commission’s intent. It may well be that in its zeal 

for enforcement, the Commission more recently has tended to 

seek injunctions in part for their general deterrent effect. See 

James D. Cox et al., SEC Enforcement Heuristics: An 

Empirical Inquiry, 53 Duke L.J. 737, 751 (2003). The impetus 

may be understandable; after all, SEC enforcement actions are 

“independent of the claims of individual investors” and are 

aimed at “promot[ing] economic and social policies.” Teo, 746

F.3d at 102 (alteration in original) (quoting SEC v. Rind, 991 

F.2d 1486, 1490 (9th Cir. 1993)); see Comment, Federal 

Agencies, supra, at 1048–49. But any tendency in that 

direction would be at odds with the Commission’s own 

understanding of the limits on its powers, cf. Saad, 2019 WL 

3995968, at *3–5, *12. And ultimately, rather than probe the 

agency’s rationale for seeking a judicial remedy, we look to the

nature of the remedy itself as explained by the courts imposing 

it. See Kokesh, 137 S. Ct. at 1643–44 (analyzing why 

disgorgement “is imposed by the courts”); cf. Tull, 481 U.S. at
27

423 (“Thus, the District Court intended not simply to disgorge 

profits but also to impose punishment.”).

Second, Gentile argues that because obey-the-law 

injunctions require mere compliance with preexisting 

obligations, they must be punitive. Citing Bonastia, the 

Commission responds that “injunctions that track the statutory 

language charged in a complaint are permissible in this 

Circuit.” SEC Br. 30 n.5. Gentile’s argument has some force to 

the extent that obey-the-law injunctions pose a risk of 

overbreadth, lack of fair notice, unmanageability, and 

noncompliance with Federal Rule of Civil Procedure 65(d). 

See Graham, 823 F.3d at 1362 n.2 (collecting cases); SEC v. 

Smyth, 420 F.3d 1225, 1233 n.14 (11th Cir. 2005) (collecting 

cases); Savoy, 665 F.2d at 1318; United States v. Corn, 836 F.2d 

889, 892 & n.6 (5th Cir. 1988); Laycock, supra, at 274–75. So 

in some cases—and perhaps in this one—an obey-the-law 

injunction will add little if anything to the sanctions already in 

place. There has been and continues to be “a difference of 

opinion as to whether as a general proposition injunctions to 

‘obey the law’ should be issued in order that enforcement by 

administrative agencies may be sought by contempt rather than 

by the statutory route.” SEC v. Thermodynamics, Inc., 464 F.2d 

457, 461 (10th Cir. 1972).

But Gentile has not asked us to hold obey-the-law 

injunctions impermissible—he argues only that they are 

subject to the § 2462 statute of limitations. So we note only that

the appropriate scope of an injunction against further 

lawbreaking depends on the facts and circumstances of each 

case. Courts should make this determination on a developed 

record, SEC v. Gabelli, 653 F.3d 49, 61 (2d Cir. 2011), rev’d on 

other grounds, 568 U.S. 442 (2013), assuming the plaintiff has 

stated a plausible claim for relief, see EME Homer City 
28

Generation, 727 F.3d at 295–96 (affirming dismissal of claims 

for improper injunctive relief). It is true that in Bonastia we 

reversed the district court’s refusal to grant an obey-the-law 

injunction. See 614 F.2d at 910–11. We have also struck

overbroad language enjoining parties to obey the law. See 

Belitskus v. Pizzingrilli, 343 F.3d 632, 650 (3d Cir. 2003) 

(citing Pub. Interest Research Grp. of N.J., Inc. v. Powell 

Duffryn Terminals, Inc., 913 F.2d 64, 83 (3d Cir. 1990), and

Warren, 583 F.2d at 121). The “degree of particularity required 

of an injunction depends on the subject matter involved.” Pub. 

Interest Research Grp., 913 F.2d at 83 (quoting Calvin Klein 

Cosmetics Corp. v. Parfums de Coeur, Ltd., 824 F.2d 665, 669 

(8th Cir. 1987)). Ultimately, “[t]he district courts are invested 

with discretion to model their orders to fit the exigencies of the 

particular case, and have the power to enjoin related unlawful 

acts which may fairly be anticipated from the defendants’ 

conduct in the past, but a decree cannot enjoin conduct about 

which there has been no complaint.” United States v. Spectro 

Foods Corp., 544 F.2d 1175, 1180 (3d Cir. 1976) (footnotes 

omitted); see NLRB v. Express Publ’g. Co., 312 U.S. 426, 435–

37 (1941).

We stress that the District Court, on remand, should not 

rubber-stamp the Commission’s request for an obey-the-law 

injunction simply because it has been historically permitted to 

do so by various courts. After all, Bonastia was decided almost 

40 years ago, when the landscape for SEC enforcement actions 

was significantly different than today’s. See Kokesh, 137 S. Ct. 

at 1640. Indeed, Congress did not enact the penny-stock bar 

until ten years later. If the District Court, after weighing the 

facts and circumstances of this case as alleged or otherwise, 

concludes that the obey-the-law injunction sought here serves 

no preventive purpose, or is not carefully tailored to enjoin 
29

only that conduct necessary to prevent a future harm, then it 

should, and must, reject the Commission’s request. We note 

that the District Court has already addressed some of the 

relevant concerns involved in its opinion. We are also troubled 

by the fact that the Commission appears to seek two 

injunctions that attempt to achieve the same result.

Third, Gentile argues the penny stock bar is punitive 

because it “provides no benefit to victims of alleged past 

securities violations, nor does it purport to do so.” Gentile Br. 

27. In making this argument, he tacitly agrees with us that 

§ 78u(d)(6) penny stock bars are injunctive in nature. But then 

he cites a series of cases that involve administrative 

suspensions and debarments, not court-ordered injunctive 

relief. See De La Fuente v. FDIC, 332 F.3d 1208, 1214–15, 

1219–20 (9th Cir. 2003); Proffitt v. FDIC, 200 F.3d 855, 860–

61 (D.C. Cir. 2000); Johnson, 87 F.3d at 488; Saad v. SEC, 873 

F.3d 297, 304 (D.C. Cir. 2017) (Kavanaugh, J., concurring). 

We concede some courts have used similar logic. See Collyard, 

861 F.3d at 764 (citing Riordan v. SEC, 627 F.3d 1230, 1234 

(D.C. Cir. 2010) (Kavanaugh, J.), abrogated on other grounds 

by Kokesh, 137 S. Ct. 1635); Telluride, 146 F.3d at 1246–47; 

Bartek, 484 F. App’x at 956–57. But we think the distinction 

between injunctions and administrative sanctions makes all the 

difference. See supra Part IV; Arthur Lipper, 547 F.2d at 180 

n.6. Our analysis is, after all, predicated on traditional 

principles of judicial relief. Gentile is quite right to point out 

that exclusion from one’s chosen profession is a devastating 

sanction. But the question is not whether an administrative 

sanction can be punitive; it is whether a federal court can issue 

a § 78u(d)(6) injunction for punitive purposes. It cannot.

Finally, Gentile argues that the obey-the-law injunction 

and penny stock bar are punitive because they do not seek to 
30

restrain imminent violations. Gentile concedes, as he must, that 

an injunction against an imminent violation is not a penalty. 

See Gentile Br. 42 (“Of course the SEC has unlimited power to 

obtain an injunction against an individual who is actually 

violating the securities laws or on the precipice of doing so.”). 

He objects that his case does not rise to that standard. It is true 

that we apply a somewhat less demanding imminence standard 

in SEC enforcement cases than we do in reviewing the FTC’s

exercise of similar statutory injunction authority. Compare 

Bonastia, 614 F.2d at 912 (“The well established standard . . .

is based on a determination of whether there is a reasonable 

likelihood that the defendant, if not enjoined, will again engage 

in the illegal conduct.”), with FTC v. Shire ViroPharma, Inc., 

917 F.3d 147, 158 (3d Cir. 2019) (“‘[I]s about to violate’ means 

something more than a past violation and a likelihood of 

recurrence.”). But neither Bonastia nor the Aaron Court (which 

seemed to approve a test much like ours) dispensed with the 

requirement of “a proper showing.” See Aaron, 446 U.S. at 701 

(“[T]he Commission must establish a sufficient evidentiary 

predicate to show that such future violation may occur.” (citing 

Commonwealth Chem., 574 F.2d at 98–100)); Bonastia, 614 

F.2d at 913 (concluding that the SEC had made “a strong 

showing” that justified the reversal of the district court and 

entry of an injunction). Nor did either suggest that the fact of a 

past violation alone was sufficient to impose so onerous and 

stigmatizing a sanction as an industry bar or obey-the-law 

injunction. Rather, even with a lesser imminence requirement, 

we insisted the showing itself be substantial and based as well 

on “the circumstances surrounding the particular defendant.” 

Bonastia, 614 F.2d at 912. 

Along those same lines, we are mindful that we are 

interpreting the meaning of “penalty” for statute of limitations 
31

purposes. Even assuming a valid preventive injunction could 

be a penalty, it is hard to see when it would accrue. See 

Johnson, 87 F.3d at 489 n.7. Gentile’s argument must reject 

either Bonastia or our conclusion that § 78u(d)(1) and (6) 

conform to traditional equitable principles. We can do neither.

VI

SEC injunctions come with serious collateral 

consequences. Commonwealth Chem., 574 F.2d at 99; Am. Bd. 

of Trade, 751 F.2d at 535. They can lead to administrative 

sanctions and disabilities, see Thomas J. Andre, Jr., The 

Collateral Consequences of SEC Injunctive Relief: Mild 

Prophylactic or Perpetual Hazard?, 1981 U. Ill. L. Rev. 625, 

643–68, and collaterally estop defendants in subsequent 

private litigation, see Parklane Hosiery Co. v. Shore, 439 U.S. 

322, 331–33 (1979). Enjoined defendants suffer harm to their 

personal and business reputations. See Sec. Inv’r Prot. Corp. v. 

Barbour, 421 U.S. 412, 423 n.5 (1975) (“The moment you 

bring a public proceeding against a broker-dealer who depends 

upon public confidence in his reputation, he is to all intents and 

purposes out of business.” (quoting Milton V. Freeman, 

Administrative Procedures, 22 Bus. Law 891, 897 (1967))); 

Warren, 583 F.2d at 122; ABA Committee on Federal 

Regulation of Securities, Report of the Task Force on SEC 

Settlements, 47 Bus. Law. 1083, 1091, 1149–50 (1992). And 

when a court bans a defendant from his industry, it imposes 

what in the administrative context has been called the 

“securities industry equivalent of capital punishment.” Saad v. 

SEC, 718 F.3d 904, 906 (D.C. Cir. 2013) (quoting PAZ Sec., 

Inc. v. SEC, 494 F.3d 1059, 1065 (D.C. Cir. 2007)). 

So we conclude by repeating Judge Friendly’s warning: 

an SEC injunction “often is much more than [a] ‘mild 
32

prophylactic.’” Commonwealth Chem., 574 F.2d at 99. When 

the Commission seeks an injunction, “the famous admonitions 

in [Hecht] must never be forgotten.” Am. Bd. of Trade, 751 F.2d 

at 535–36. 

* * *

Because properly issued and framed injunctions under 

§ 78u(d)(1) and (6) are not penalties governed by § 2462, we 

will vacate the District Court’s judgment and remand for 

proceedings consistent with this opinion.