On June 4, 2026, the United States Supreme Court issued a unanimous decision in Sripetch v. SEC that significantly broadens the Securities and Exchange Commission's enforcement authority. The Court held that the SEC is not required to prove that investors suffered actual pecuniary loss in order to obtain disgorgement under 15 U.S.C. §78u(d)(5) or §78u(d)(7). The ruling resolves a longstanding circuit split and forecloses what had become a meaningful defense for targets of SEC enforcement actions in certain jurisdictions.
Prior to Sripetch, defendants in some circuits had successfully argued that disgorgement was inappropriate where the government could not demonstrate that investors had been financially harmed by the alleged misconduct. That so-called 'no-loss' defense has now been definitively eliminated. Under the Court's reasoning, the focus of disgorgement remains on the wrongdoer's ill-gotten gains rather than on any corresponding investor injury. As a practical matter, this means the SEC may pursue disgorgement based on profits attributable to a violation even when no investor can be identified as having lost money.
The implications for companies and individuals facing SEC scrutiny are substantial. The decision strengthens the agency's leverage in both settlement negotiations and contested litigation, expanding the universe of cases in which disgorgement is a viable and significant remedy. Enforcement targets who previously relied on the absence of investor harm to limit financial exposure should expect that argument to be unavailable going forward, and should anticipate that the SEC will press disgorgement claims more aggressively across a wider range of matters.
In light of Sripetch, businesses and individuals subject to securities regulation should reassess their exposure models and internal compliance protocols. Boards, compliance officers, and in-house counsel may wish to revisit risk assessments related to securities-law compliance, document-retention practices, and the financial accounting of revenues that could be characterized as proceeds of a violation. Litigation strategy in pending and anticipated SEC matters should likewise be reevaluated, with particular attention to settlement posture and the scope of potential monetary recovery.
This alert provides general information and is not legal advice. Clients facing SEC inquiries or enforcement matters should consult qualified counsel for advice tailored to their specific circumstances.