The Changing Face of the SEC Restitution Remedy
In Liu v. SEC, the Court trimmed the sails of the SEC’s ability to get equitable restitution under the name “disgorgement.” Justice Thomas’s dissent correctly said there was no traditional equitable remedy of disgorgement. The majority correctly said that although the name “disgorgment” may have been new, there was a longstanding practice of equitable restitution, under names like “accounting for profits.” And the majority reined in the SEC practice, requiring it to conform more closely to traditional equitable requirements (including the principle that there are no penalties in equity, a principle best explained in the Heydon opinion in the Australian case of Harris v. Digital Pulse).
But what tied together the majority and dissent was that the SEC suits for restitution, if they were to be allowed, had to be justified by recourse to the history of equity. The reason for this focus on equitable restitution was plain enough, because the statutory basis for relief was an authorization of “equitable relief.”
Now restitution comes in two flavors: legal and equitable. Legal restitution comes from the old common counts, Moses v. Macferlan, etc., and for a while the term in vogue for this category was “quasi-contract.” Other terms are “restitution via money judgment” or simply “legal restitution.” Equitable restitution is organized according to a set of distinctive remedies–accounting for profits and then various proprietary remedies (constructive trust, equitable lien, subrogation).
Although the SEC has typically sought equitable restitution (understandably, given the statutory authorization), one could imagine the SEC being authorized to sue for legal restitution, which would be subject to different powers and limits.
An aside: note that the word disgorgement doesn’t tell us anything about whether the remedy soug
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