Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Business Crimes BulletinFeaturesLitigationRegulationWhite Collar Crime

How Will Courts Determine Business Expense Legitimacy Under SEC's New Disgorgement Authority?

By Jorge deNeve, Michael Simeone and David Cohen
September 01, 2021

As courts, the Securities and Exchange Commission (SEC) and defendants wrangle with new limits on the Commission's authority to seek disgorgement of ill-gotten gains, one question has dominated: How will courts determine which business expenses are legitimate and which are not? Answering that question will force defendants facing SEC enforcement actions to focus on demonstrating the legitimacy of expenses in developing their litigation strategies.

Over the past four years, Congress and the Supreme Court have reshaped the SEC's authority to obtain disgorgement of ill-gotten gains. The Supreme Court's decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017) — which addressed the statute of limitations for the SEC's ability to obtain disgorgement — left open the question of whether the SEC even had authority to seek disgorgement. The Supreme Court took up that issue when, in 2019, it granted review in Liu v. SEC, 140 S. Ct. 1936, 1940 (2020). The Supreme Court's decision in June 2020 ultimately upheld the SEC's authority to obtain disgorgement but also narrowed the circumstances in which the SEC can seek it. And earlier this year in the National Defense Authorization Act, Congress passed legislation expressly reaffirming the SEC's ability to obtain disgorgement.

This premium content is locked for Business Crimes Bulletin subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

The DOJ's New Parameters for Evaluating Corporate Compliance Programs Image

The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.

Use of Deferred Prosecution Agreements In White Collar Investigations Image

This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Compliance Officers: Recent Regulatory Guidance and Enforcement Actions and Mitigating the Risk of Personal Liability Image

This article explores legal developments over the past year that may impact compliance officer personal liability.