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Page Number: 15

12 

LIU v. SEC 

Opinion of the Court 

comfortably within “those categories of relief that were typ-
ically available in equity.”  Mertens, 508 U. S., at 256. 

C 
By incorporating these longstanding equitable principles
into §78u(d)(5), Congress prohibited the SEC from seeking 
an equitable remedy in excess of a defendant’s net profits
from wrongdoing.  To be sure, the SEC originally endeav-
ored  to  conform  its  disgorgement  remedy  to  the  common-
law  limitations  in  §78u(d)(5).    Over  the  years,  however,
courts  have  occasionally  awarded  disgorgement  in  three
main ways that test the bounds of equity practice: by order-
ing the proceeds of fraud to be deposited in Treasury funds
instead of disbursing them to victims, imposing joint-and-
several disgorgement liability, and declining to deduct even 
legitimate expenses from the receipts of fraud.3  The SEC’s 
disgorgement remedy in such incarnations is in considera-
ble tension with equity practices.

Petitioners go further.  They claim that this Court effec-
tively decided in Kokesh that disgorgement is necessarily a
penalty, and thus not the kind of relief available at equity.
Brief  for  Petitioners  19–20,  22–26.  Not  so.  Kokesh  ex-
pressly declined to pass on the question.  581 U. S., at ___, 
n. 3 (slip op., at 5, n. 3).  To be sure, the Kokesh Court eval-
uated  a  version  of  the  SEC’s  disgorgement  remedy  that
seemed to exceed the bounds of traditional equitable prin-
ciples.  But that decision has no bearing on the SEC’s ability 

—————— 

3 See, e.g., SEC v. Clark, 915 F. 2d 439, 441, 454 (CA9 1990) (requiring
defendant to disgorge the profits that his stockbroker made from unlaw-
ful trades); SEC v. Brown, 658 F. 3d 858, 860–861 (CA8 2011) (per cu-
riam)  (ordering  joint-and-several  disgorgement  of  funds  collected  from
investors  and  concluding  that  “ ‘the  overwhelming  weight  of  authority
hold[s]  that  securities  law  violators  may  not  offset  their  disgorgement
liability  with  business  expenses’ ”);  SEC  v.  Contorinis,  743  F.  3d  296, 
304–306 (CA2 2014) (requiring defendant to disgorge benefits conferred 
on close associates).