June 23, 2020

Jim Lundy Comments on Supreme Court’s Decision in Liu v. SEC


InvestmentNews turned to partner Jim Lundy for reaction to the Supreme Court’s recent decision in Liu v. SEC. The industry publication provided coverage of the decision that upheld, but reined in the Securities and Exchange Commission (SEC)’s main remedy for clawing back money from defendants. The limitations outlined by the Supreme Court appear to provide some protections to financial advisers caught in the agency’s cross hairs.

InvestmentNews reports that in an 8-1 ruling, the high court held that the SEC can obtain so-called disgorgement of ill-gotten gains in federal court as long as the award does not exceed the wrongdoer’s net profit and is given to victims of the alleged violative conduct.

Lundy told the industry publication that the ruling could help firms defend themselves against SEC disgorgement claims in revenue-sharing cases, where it’s sometimes difficult to determine how investors were harmed and how to return money to them.

“This decision says disgorgement should align more closely to restitution,” he added. “There are arguments from this opinion that could be fashioned to push back on a claim by enforcement to pay revenue-sharing back to the government.”

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