Exceptional and accessible legal representation across Kentucky and Nationwide

Exceptional and accessible legal representation across Kentucky and Nationwide


Why investors should know about disgorgement

On Behalf of | Jun 12, 2019 | Representing Investors |

Even if you don’t know what it means, the term “disgorgement” may sound particularly painful. Indeed, it can be painful for those who are guilty of violating securities regulations or engaging in other illegal or unethical business activity.

Disgorgement refers to the repayment of money, with interest, to victims of such illegal or unethical activity. It’s a strictly remedial civil action. It’s not meant to recover punitive damages.

Companies and individuals who violate Securities and Exchange Commission (SEC) regulations often have to make disgorgement payments and pay civil penalties for actions involving embezzlement, insider trading and other violations of the Foreign Corrupt Practices Act (FCPA).

A unanimous U.S. Supreme Court ruling two years ago placed some limits on the SEC’s ability to use disgorgement to recoup money. Among other things, it placed a five-year statute of limitations on the recovery of ill-gotten gains. According to an enforcement report by the SEC last year, that ruling could prevent them from recovering as much as $900 million in disgorgement payments.

That could change thanks to a bipartisan bill introduced earlier this year in the U.S. Senate. The bill, called the Securities Fraud Enforcement and Investor Compensation Act, would allow the SEC 10 years to pursue claims of fraud. It would also increase the amount of compensation that victimized investors could recover.

One of the senators behind the bill, Sen. Mark Warner, said, “As Bernie Madoff demonstrated, financial fraudsters can sometimes go on for years, even decades, before they finally get caught. They shouldn’t be able to rip off investors just because some arbitrary five-year window has expired.”

Warner’s colleague, Sen. John Kennedy, noted that with the current five-year statute of limitations, “fraudsters are actually incentivized to keep the shell game going for decades.”

Many investors who have been harmed by powerful institutions and other financial professionals don’t know what options they have to recover their losses — or if they have any options at all. It can feel like a daunting task to go up against these powerful entities.

However, there are numerous laws and regulations in place to protect investors. Attorneys experienced in helping investors recover their losses and pursue justice can provide valuable guidance.

FindLaw Network