SEC Enforcement Expansion May Face Constitutional Limits

By Joshua Robbins (January 20, 2021, 3:06 PM EST) -- Buried at page 1,211 of the recently enacted National Defense Authorization Act is an amendment to the Securities Exchange Act of 1934, which expressly authorizes the U.S. Securities and Exchange Commission to bring a claim for disgorgement in its enforcement actions, and extends the statute of limitations for that remedy in fraud cases to 10 years.[1]

The amendment responds to the U.S. Supreme Court's recent decisions in Kokesh v. SEC[2] and Liu v. SEC,[3] which had narrowed both the statute of limitations for SEC disgorgement claims and the types of disgorgement the agency could seek. It expressly applies to both pending...

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