The Supreme Court's June 4, 2026, ruling in Sripetch v. SEC eliminates the investor-loss requirement for disgorgement, reshaping enforcement leverage in every federal circuit.
The Supreme Court ruled on June 4, 2026, that the Securities and Exchange Commission does not need to prove investors suffered a pecuniary loss before a court may order disgorgement in an enforcement action [1]. The decision resolves a long-running three-way circuit split over the standard governing disgorgement awards under 15 U.S.C. §§ 78u(d)(5) and 78u(d)(7) [1]. The Court held that disgorgement's purpose is to strip wrongdoers of ill-gotten gains, not to compensate identifiable victims, and that requiring proof of investor loss would frustrate that deterrent function [2].
The case, *Sripetch v. SEC*, No. 25-466, arose in the federal courts and reached the Supreme Court as a vehicle to settle conflicting appellate precedents [1]. The Second Circuit had required the SEC to demonstrate "pecuniary harm" to victims as a precondition to disgorgement, a standard the First and Ninth Circuits had rejected in favor of a gain-focused inquiry [2]. The Supreme Court sided with the First and Ninth Circuits, abrogating the Second Circuit's more defendant-friendly rule [1].
The ruling carries substantial consequences for securities enforcement practice. Before *Sripetch*, defendants in the Second Circuit could contest disgorgement demands by arguing that no investor sustained a measurable loss, a defense that often narrowed exposure or complicated settlement math [2]. That argument is now foreclosed in every federal circuit. The SEC may seek disgorgement of gross profits from misconduct without first linking those profits to documented harm suffered by any particular investor [1]. The practical effect is that the agency's headline disgorgement numbers, which already routinely run into the tens or hundreds of millions of dollars in major enforcement actions, are no longer anchored to a victim-loss ceiling [2].
Defense counsel will need to recalibrate litigation strategy accordingly. Prior briefing that stressed the absence of proven investor harm as a bar to disgorgement is now obsolete as a matter of federal law [2]. Settlement negotiations in parallel civil proceedings will likewise shift, because the SEC's maximum potential recovery in court is no longer constrained by a showing defendants could previously force the agency to make [2]. Practitioners should also expect the SEC's Division of Enforcement to invoke *Sripetch* aggressively in pending actions where disgorgement demands had been contested on pecuniary-harm grounds [1].
Immediate next steps include monitoring how district courts implement the standard at the remedies phase of active SEC actions, and whether Congress responds with legislation defining permissible disgorgement methodologies [2].