The U.S. Supreme Court’s recent decision in Kokesh v. SEC imposes a five-year statute of limitations on agency-sought disgorgement in SEC enforcement actions, resolving a Circuit split and definitively categorizing disgorgement as a statutory “penalty” under 28 U.S.C. § 2462. That statute applies a five-year limitations period to any “action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise.”
The Court’s decision now precludes the SEC from seeking disgorgement of ill-gotten gains in enforcement actions where the fraud or misappropriation occurred more than five years before the date on which the SEC files its complaint. Prior to the Court’s decision in Kokesh, the Commission could seek disgorgement judgments for alleged violations occurring many years prior to filing a complaint.