New article on the recent Kokesh case by yours truly. I was limited to 5,000 words by the review, so it's short and very to the point:
Disgorgement of ill-gotten gains long has been a basic tool in the Securities and Exchange Commission’s (SEC) penalty toolkit, despite a paucity of statutory authorization. Because disgorgement lacked a statutory framework, courts have had to flesh out the sanction via interstitial rulemaking. In Kokesh v. SEC, the US Supreme Court took up the seemingly technical—but surprisingly important—question of what statute of limitations applies to SEC disgorgement actions. More important, at least for present purposes, the Court’s opinion cast into doubt the validity of the seemingly well-established disgorgement sanction.
Earlier cases based the SEC’s authority to seek and the courts’ power to impose disgorgement on the claim that it is a form of equitable ancillary relief. If disgorgement is a penalty, however, courts lack that power and the SEC lacks that authority. This conclusion follows necessarily from the basic premise that there are no penalties in equity and the complete absence of any statutory authority to impose disgorgement as a legal sanction. Now that the Supreme Court has made clear that disgorgement is, in fact, a penalty, the future of the disgorgement penalty looks bleak.
Bainbridge, Stephen M., Kokesh Footnote 3 Notwithstanding: The Future of the Disgorgement Penalty in SEC Cases (2017). UCLA School of Law, Law-Econ Research Paper No. 17-12. Available at SSRN: https://ssrn.com/abstract=2992719