Kokesh v. Securities and Exchange Commission
United States Supreme Court
137 S. Ct. 1635 (2017)
- Written by Steven Pacht, JD
Facts
In late 2009, the Securities and Exchange Commission (SEC) (plaintiff) sued Charles Kokesh (defendant), alleging that between 1995 and 2009, Kokesh stole almost $35 million from his clients and made false and misleading SEC filings to hide his misdeeds in violation of the Securities Exchange Act of 1934. After the jury found for the SEC, the district court ruled that 28 U.S.C. § 2462, the general federal five-year statute of limitations for actions regarding the enforcement of “any civil fine, penalty, or forfeiture,” did not apply to disgorgement because disgorgement is not a penalty. The district court thus ordered Kokesh to pay almost $35 million in disgorgement, of which nearly $30 million related to misconduct that occurred more than five years before the SEC’s suit. Kokesh appealed, arguing that disgorgement was a penalty within the meaning of § 2462. The court of appeals affirmed, holding that disgorgement is not a penalty under § 2462. Kokesh appealed to the Supreme Court, which agreed to decide whether disgorgement claims in SEC proceedings are subject to § 2462’s five-year limitations period. The SEC conceded that it acts in the public interest if it seeks disgorgement but argued that disgorgement is not a penalty. Rather, per the SEC, disgorgement is remedial because it simply returns the defendant to where he was before he broke the law.
Rule of Law
Issue
Holding and Reasoning (Sotomayor, J.)
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