Interest of Amicus Curiae
The Securities Industry and Financial Markets Association (SIFMA), representing U.S. and global capital markets broker-dealers, investment banks, and asset managers, submits this brief. SIFMA advocates on behalf of nearly one million employees concerning legislation, regulation, and business policy impacting investors, markets, and financial services. Its mission is to promote fair and orderly markets, regulatory compliance, and market efficiency. SIFMA's concerns stem from the SEC's pursuit of disgorgement, a remedy not explicitly authorized by the 1990 Securities Enforcement Remedies and Penny Stock Act, which allows for substantial monetary penalties. While SIFMA does not condone unlawful conduct and recognizes the SEC's investor protection role, it argues that existing statutory civil penalties are sufficient and that courts should not exceed Congress's clearly defined remedies.
Summary of Argument
The SEC's contention that Section 21(d)(5) of the Exchange Act permits disgorgement as "equitable relief" is challenged. The argument further refutes the SEC's alternative claim that Sections 20(b) of the Securities Act and 21(d)(1) of the Exchange Act implicitly authorize disgorgement through the power to "enjoin" violations. The amicus brief maintains that SEC disgorgement, as established in Kokesh v. SEC, functions as a penalty, precluding its classification as equitable relief. Even if deemed equitable, its application under Section 21(d)(5) is inappropriate due to the existence of adequate alternative remedies (civil penalties). Finally, the brief argues that disgorgement is not an injunction nor ancillary to one, given the forward-looking nature of the relevant statutes.
Argument I: SEC Disgorgement as Equitable Relief
Section 21(d)(5) of the Exchange Act, permitting "equitable relief," is interpreted through the lens of pre-merger law and equity court practices. Kokesh v. SEC definitively establishes that SEC disgorgement constitutes a penalty under 28 U.S.C. § 2462, a classification incompatible with equitable remedies. The non-compensatory nature of SEC disgorgement, its potential to exceed actual profits, and its punitive intent, as detailed in Kokesh, further solidify its penal character. This contrasts sharply with historically available equitable remedies, where monetary judgments were typically linked to specific assets or property, unlike the purely monetary nature of SEC disgorgement. The brief distinguishes SEC disgorgement from the equitable remedy of accounting, historically applicable only to fiduciary relationships. Relevant case law is analyzed to support this distinction.
Argument II: Appropriateness and Necessity of Disgorgement
Even if categorized as equitable, SEC disgorgement fails the "appropriate or necessary for the benefit of investors" test of Section 21(d)(5). The existence of comprehensive civil penalty provisions, including the potential to exceed a defendant's pecuniary gain, renders disgorgement redundant. Relevant Supreme Court precedent emphasizing the avoidance of superfluous remedies and the preference for established statutory mechanisms is cited. The brief highlights that civil penalties, mirroring the effects of disgorgement on investors, are a sufficient alternative.
Argument III: Disgorgement and Injunctive Powers
The SEC's claim that disgorgement is authorized by provisions allowing courts to "enjoin" securities law violations is contested. The brief argues that disgorgement is neither an injunction nor ancillary relief. Analysis of the forward-looking nature of the relevant statutory language in the Securities Act and Exchange Act reveals its incompatibility with the backward-looking nature of disgorgement. Relevant case law, including the Seventh Circuit's FTC v. Credit Bureau Center, LLC decision, is discussed, emphasizing the limitations of injunctive provisions in relation to disgorgement. The amicus brief concludes by asserting that reversing the Ninth Circuit's judgment is warranted based on the presented arguments.
Interest of Amicus Curiae
The Securities Industry and Financial Markets Association (SIFMA), a leading trade association representing broker-dealers, investment banks, and asset managers in U.S. and global capital markets, submits this brief. SIFMA advocates on behalf of its nearly one million employees concerning legislation, regulation, and business policy impacting investors and markets. Its mission includes promoting fair and orderly markets, regulatory compliance, and efficient market operations. SIFMA acts as an industry coordinator and provides a forum for policy discussions and professional development.
Summary of Argument
The SEC's assertion that Section 21(d)(5) of the Exchange Act authorizes disgorgement as equitable relief is challenged. This section allows for equitable relief deemed "appropriate or necessary for the benefit of investors." The argument that the SEC's authority stems from provisions allowing courts to "enjoin" violations is also contested. The core arguments are: (1) Disgorgement, as established by Kokesh v. SEC, functions as a penalty, not an equitable remedy; (2) Even if equitable, disgorgement isn't "appropriate or necessary" given Congress's provision of adequate alternative remedies (civil penalties); and (3) Disgorgement isn't authorized by injunction provisions as it's not an injunction, nor ancillary relief.
Argument I: SEC Disgorgement is Not “Equitable Relief”
Section 21(d)(5) of the Exchange Act permits equitable relief considered appropriate or necessary for investor benefit. Supreme Court precedent clarifies that "equitable relief" signifies remedies historically available in equity courts before the merger of law and equity. SEC disgorgement fails this test.
Argument II: Disgorgement is Not "Appropriate or Necessary"
Even if considered equitable, SEC disgorgement is not "appropriate or necessary" under Section 21(d)(5). Congress has already established civil penalties as an adequate, if not superior, alternative. The availability of these penalties renders disgorgement redundant and unnecessary for investor protection.
Argument III: Disgorgement is Not Authorized by Injunction Provisions
The SEC's claim that disgorgement derives from provisions authorizing courts to enjoin securities law violations is refuted. Disgorgement is distinct from injunctive relief, and cannot be considered ancillary to it. The statutory language—focused on ongoing or future violations—doesn't implicitly encompass backward-looking remedies like disgorgement.
Conclusion
The Ninth Circuit's judgment should be reversed due to the insufficiency of the SEC's arguments regarding the availability of disgorgement as an equitable remedy or under injunction provisions.
Interest of Amicus Curiae
The Securities Industry and Financial Markets Association (SIFMA) is a major trade group representing U.S. and global capital market firms. It advocates for its members—broker-dealers, investment banks, and asset managers—on issues impacting investors, markets, and related services. SIFMA promotes fair markets, regulatory compliance, and efficient market operations. Its focus is on protecting the integrity of the financial system and ensuring investor confidence.
Summary of Argument
The SEC's claim to disgorgement as a remedy lacks Congressional authorization. The SEC's argument hinges on Section 21(d)(5) of the Exchange Act, permitting "equitable relief," and the court's power to "enjoin" violations. However, Kokesh v. SEC established disgorgement as a penalty, incompatible with equitable relief. Furthermore, Congress already provides adequate remedies through civil penalties, making disgorgement unnecessary. The "enjoin" provisions are forward-looking, not backward-looking like disgorgement.
Argument I. SEC Disgorgement Isn't "Equitable Relief"
Section 21(d)(5) of the Exchange Act allows for "equitable relief" beneficial to investors. Supreme Court precedent clarifies that "equitable relief" refers to remedies historically available in equity courts. Kokesh definitively labels SEC disgorgement a penalty, making it ineligible for equitable relief because equity courts didn't impose penalties. Disgorgement frequently exceeds actual profits and isn't always fully compensatory to victims, further supporting its classification as a penalty.
Argument II. Disgorgement Is Redundant Given Existing Penalties
Even if disgorgement were considered equitable, Section 21(d)(5) only permits relief "appropriate or necessary for the benefit of investors." Congress has already established an adequate alternative—civil penalties— potentially exceeding the defendant's gains. The existence of this equivalent remedy renders disgorgement unnecessary.
Argument III. Disgorgement Isn't Authorized by Injunction Provisions
The SEC's argument that the power to "enjoin" implies the power to order disgorgement is flawed. Disgorgement isn't an injunction; it's a backward-looking monetary judgment addressing past actions. The statutes authorizing injunctions are forward-looking, focusing on preventing future violations. Therefore, these provisions don't implicitly authorize disgorgement.
Conclusion
The Ninth Circuit's ruling should be reversed due to the lack of Congressional authorization for SEC disgorgement and the established incompatibility of disgorgement with equitable remedies.
Summary
This document explains why a group called SIFMA believes the court should not let the SEC (Securities and Exchange Commission) take money from people who broke securities laws through a process called disgorgement. SIFMA says Congress already gave the SEC ways to punish wrongdoers, and disgorgement isn't one of them. They argue that disgorgement acts like a penalty, not a way to fairly fix things, and that Congress has given the SEC other tools to use.
Interest of Amicus Curiae
SIFMA is a big group that represents lots of companies that buy and sell stocks and bonds. They want fair markets and good rules, so they're explaining their views to the court. They think the SEC shouldn’t use disgorgement because Congress already gave the SEC ways to get money back from people who cheat.
Summary of Argument
SIFMA says the law doesn't let the SEC use disgorgement. They think disgorgement is a type of punishment, not a fair way to fix problems. Congress already made laws for the SEC to punish people who break rules, so disgorgement isn't needed.
Argument I. SEC Disgorgement Isn't Fair Relief
The law only lets the court help investors in fair ways. SIFMA says disgorgement is not fair because it acts like a penalty and courts can't give penalties. Also, disgorgement can be more than the money someone made unfairly, which isn't fair.
Argument II. Disgorgement Isn't Needed
Even if disgorgement were fair, it's not needed because Congress made laws giving the SEC other ways to take money from cheaters. These other ways are just as good, and the SEC already has them.
Argument III. Disgorgement Isn't Allowed
The SEC also says it can use disgorgement because the law lets courts stop people from breaking rules. SIFMA says this is wrong; disgorgement is about past actions, while stopping rule-breaking is about the future. The law only talks about stopping bad things, not taking back money.
Conclusion
SIFMA asks the court to rule against the SEC and say disgorgement is not allowed.