High Court's SEC Enforcement Ruling Has Tax Consequences

Law360 (June 26, 2020, 7:04 PM EDT) -- The U.S. Supreme Court recently delivered its decision in Liu v. U.S. Securities and Exchange Commission,[1] an SEC enforcement case that has important tax implications for companies facing potential disgorgement of their net profits in actions brought by government agencies.

Disgorgement may arise in an array of SEC enforcement contexts, including securities fraud, insider trading, foreign bribery and other areas. 

In Liu, the SEC argued, consistent with its long-standing position, that a disgorgement award that does not exceed a wrongdoer's net profits is not utilized for punitive purposes, and is thus a form of equitable relief that is permissible under Section78u(d)(5)....

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