What Exactly is Disgorgement?

The FCPA Blog
03.17.11

In this article, Marc Alain Bohn explains disgorgement, a heavily relied on aspect of the SEC's FCPA enforcement strategy in recent years. Disgorgement is an equitable remedy authorized by the Securities Exchange Act of 1934 that is used to deprive wrong-doers of their ill-gotten gains and deter violations of federal securities law. The Act gives the SEC the authority to enter an order "requiring accounting and disgorgement," including reasonable interest, as part of administrative or cease and desist proceedings.

As an equitable remedy, disgorgement is technically not intended as a tool to punish, but instead as a vehicle for preventing unjust enrichment. The SEC is therefore only permitted to recover the approximate amount earned from the alleged illicit activities (disgorging anything more would be considered punitive). The article discusses the SEC calculation of disgorgement and rebutting a disgorgement calculation.

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