Source: https://www.subjecttoinquiry.com/enforcement-and-prosecution-policy-and-trends/u-s-supreme-court-rules-time-limits-apply-to-sec-disgorgement-orders/
Timestamp: 2019-04-18 22:16:53+00:00

Document:
A unanimous United States Supreme Court held Monday, in Kokesh v. Securities and Exchange Commission, that the five-year statute of limitations under 28 U.S.C. § 2462 applies to disgorgement sought by the Securities and Exchange Commission. Previously, the Circuits had been split on this issue.
The issue in Kokesh was straightforward. Kokesh appealed a trial court judgment ordering disgorgement of nearly $35 million for conduct between 1995 and 2009. Kokesh argued that this disgorgement award was in the nature of a penalty or forfeiture, and thus subject to the five-year statute of limitations under § 2462.
Conversely, the SEC maintained that disgorgement, by its nature, is not a punitive remedy. Rather, because disgorgement is merely a remedy that prevents offenders from reaping ill-gotten gains, the SEC argued it is not subject to § 2462’s five-year statute of limitations.
This is the second time since 2013 that the Supreme Court has narrowed the SEC’s ability to obtain monetary relief in enforcement actions. In Gabelli v. SEC, the Court held that the SEC cannot use the “discovery rule” to extend the statute of limitations for civil penalties, though the Gabelli court expressly declined to address whether the statute of limitations under § 2462 applied to disgorgement. Kokesh has now answered that question.
As disgorgement is a routine remedy for the SEC staff, the Court’s ruling will substantially impact the damages the SEC can obtain in investigations involving long-running conduct, like the conduct in Kokesh. For others subject to investigation, however, it may represent a pyrrhic victory, as the SEC staff may become even more aggressive in its use of tolling agreements, now with an eye towards extending the statutes of limitations for both liability and damages. Indeed, the SEC staff may seek tolling agreements at ever earlier stages of an investigation, including at the very outset of an investigation. Finally, the staff will may become less flexible with deadlines and requests for extensions, as it seeks to hasten the resolution of investigations in light of this newfound limitation.
Louis concentrates his practice in the area of government investigations, with an emphasis on securities enforcement and compliance. He represents public companies, public accounting firms, broker-dealers, private equity firms, hedge funds, investment advisers and their officers, directors and employees in investigations by the U.S. Securities and Exchange Commission, the U.S. Department of Justice, other federal and state agencies, and FINRA.
Ghillaine focuses her practice on government and securities regulatory investigations and corporate compliance. Drawing on her experience in government service and private practice, Ghillaine regularly represents corporations and individuals in investigations conducted by the SEC, the DOJ, FINRA and other government and regulatory agencies. Ghillaine has successfully defended several high profile SEC investigations and enforcement proceedings involving a wide range of significant issues, including insider trading, accounting fraud, market manipulation and broker-dealer sales practice violations. Prior to entering private practice, Ghillaine was a Branch Chief and Staff Attorney in the New York Regional Office of the Securities & Exchange Commission's Division of Enforcement, where she investigated and litigated a wide range of securities enforcement matters.
Noreen regularly advises clients facing regulatory and criminal investigations by the DOJ, the SEC, FINRA as well as state attorneys general. She has conducted internal investigations on behalf of audit committees and other entities involved in allegations of securities fraud, accounting fraud, violations of the Foreign Corrupt Practices Act and embezzlement. Noreen has evaluated and designed the anti-corruption compliance regimes of public companies, financial institutions and portfolio companies, and she has led anti-corruption training for executives and their employees.
Bill represents clients in complex securities matters, focusing on internal investigations, regulatory enforcement and litigation. In addition to handling investigations and litigation, Bill counsels companies and individuals on compliance with securities industry rules, reporting requirements, best practices, enhancements to policies and procedures, regulatory developments and enforcement trends. Bill also assists clients in training business, compliance and legal department personnel. Bill’s extensive experience includes serving as outside counsel for various national and regional securities firms in the areas of regulatory enforcement, internal investigations, customer arbitrations and employment litigation.
Jim is a member of the firm's Government, Regulatory and Criminal Investigations Department, serving clients primarily in regulatory, criminal and compliance matters, as well as in the resolution of complex commercial disputes. Jim is also involved with all aspects of eDiscovery matters for the firm and manages large-scale document productions both in the United States and abroad.

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