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The Corporate CounselorFeaturesGeneral Counsel and In House CounselLitigationLJN NewslettersRegulationUnited States Supreme Court

Reflections on <b><I>Kokesh v. SEC</I></b>

By Dixie L. Johnson and M. Alexander Koch

In the period since the Supreme Court's unanimous decision in Kokesh v. SEC, No. 16-529, 2017 WL 2407471 (U.S. June 5, 2017), which rejected the Securities and Exchange Commission's (SEC) longstanding position that disgorgement was an equitable remedy not subject to the five-year statute of limitations in 28 U.S.C. § 2462, many have commented about the increased need for the SEC's enforcement attorneys to complete their investigations quickly, and the frustration that hidden ill-gotten gains would never be recovered due to the five-year limit. These are important and valid ramifications, and we include them in this article.

But the Kokesh decision raises other potential consequences that have not been as widely noted. We address these other potential consequences in a two-part article. Part One, herein, addresses the following questions:

  • Does the five-year statute of limitations apply to SEC administrative actions?
  • Will the five-year statute of limitations hinder SEC enforcement?
  • Will the SEC tie cooperation credit to prompt action?
  • Can the SEC continue to obtain disgorgement?
  • Can the SEC continue to obtain pre-judgment interest on disgorgement amounts?
  • Can the SEC continue to obtain disgorgement from relief defendants?

In our second installment, we will address whether defendants and respondents can still seek indemnification or insurance coverage for disgorgement and pre-judgment interest, if disgorgement paid to the government is deductible for U.S. federal tax purposes, and whether those who paid disgorgement to the SEC for conduct outside the five-year statute of limitations period can recoup that portion of their payment.

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