Former Advisory Exec Gains SIFMA Support in Disgorgement Case

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By Antoinette Gartrell

A former advisory executive won a securities industry trade group’s backing in his U.S. Supreme Court challenge to the timeliness of an SEC action to recoup allegedly unlawful profits ( Kokesh v. SEC , U.S., No. 16-529, 3/3/17 ).

A five-year federal limitations period governing “penalty” actions applies to Securities and Exchange Commission disgorgement claims, the Securities Industry and Financial Markets Association said in a March 3 friend-of-the-court brief.

The federal appeals courts are divided on whether claims to disgorge unlawful gains are subject to the five-year bar set out in 28 U.S.C. § 2462. The U.S. Court of Appeals for the Eleventh Circuit held last year that SEC disgorgement claims must be brought within five years of when the claim accrued. In this case, an enforcement action against former investment advisory principal Charles Kokesh, the Tenth Circuit held otherwise.

Kokesh was ordered to pay $35 million in disgorgement for misappropriating money from investment companies he controlled dating back to 1995. On appeal, he failed to persuade the Tenth Circuit that the SEC’s suit was untimely under Section 2462. In January, the high court agreed to take up the controversy.

SIFMA Support

In its brief, SIFMA said the default five-year limitations period applies to SEC disgorgement claims. “Disgorgement, however labeled, is a punitive remedy that falls within Section 2462’s express reference to a `penalty’ or`forfeiture’,” SIFMA told the court.

Rulings that SEC claims for disgorgement aren’t subject to the five-year statute of limitations violate the long-settled principle that words in statutes should be given their ordinary meaning, SIFMA said.

Permitting the government to seek disgorgement in perpetuity would create uncertainty and instability in the financial markets, SIFMA said.

The case is scheduled to be argued April 18.

To contact the reporter on this story: Antoinette Gartrell in Washington at

To contact the editors responsible for this story: Phyllis Diamond at; Seth Stern at

For More Information

To view the brief, visit:

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