Analysis

F-Squared Was Wrong Test Case For SEC Disgorgement

Law360, Boston (August 28, 2018, 5:42 PM EDT) -- A recently dismissed putative class action was the wrong test case to challenge the U.S. Securities and Exchange Commission's ability to seek disgorgement penalties, according to securities attorneys, who say a set of facts that fits more closely with the U.S. Supreme Court's landmark Kokesh decision could still deal a blow to the SEC's disgorgement power.

The liquidation trustee for F-Squared Investment Management LLC's bankruptcy estate unsuccessfully tried to convince a Massachusetts federal judge that the high court's ruling last year in Kokesh v. SEC, combined with past holdings that limit the SEC to collecting penalties specifically authorized by statute, amounted...

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