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Supreme Court rules against SEC in disgorgement case

The U.S. Supreme Court ruled that the Security and Exchange Commission's disgorgement regulatory remedy is subject to a five-year statute of limitations.

In a decision released June 5, Supreme Justice Sonia Sotomayor wrote that, "Because disgorgement orders 'go beyond compensation, are intended to punish, and label defendants wrongdoers' as a consequence of violating public laws ... they represent a penalty and thus fall within the 5-year statute of limitations."

The unanimous ruling favored investment adviser Charles Kokesh, who was ordered by a lower court to pay $2.4 million in penalties and $34.9 million in disgorgement, after an SEC suit accused him of violating various securities laws by concealing the misappropriation of $34.9 million from four business-development companies from 1995 to 2009. Kokesh appealed the decision to the Supreme Court.