Potnetwork Holdings Inc. (fka POTN)

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Consumers Win Assurance of Important Protection From Securities Fraud
Ashwin Phatak

For decades, the U.S. Securities and Exchange Commission (SEC) has relied on district courts’ authority to order the disgorgement, or claw-back, of ill-gotten gains from those who violate the nation’s securities laws.

In Liu v. SEC, a case decided last month, the U.S. Supreme Court considered a challenge to that authority. The case raised the question of whether federal law permits district courts to order disgorgement relief in civil securities enforcement actions, or whether the SEC can disgorge funds only in administrative proceedings. Reassuringly for victims of fraud and other violations of the nation’s securities laws, the Court held that district courts can disgorge funds, retaining an important tool in the government’s arsenal to fight securities law violations.

The Court, however, put some limitations on district courts’ disgorgement authority and left open other questions about the scope of their disgorgement authority. It remains to be seen how the SEC and future courts will resolve those unanswered questions.

The SEC can enforce the nation’s securities laws by bringing actions to halt wrongdoers from engaging in illegal acts and practices, and securities laws grant district courts the authority to hear such cases and issue judgments. The Securities Exchange Act of 1934—which, among other things, created the SEC and prohibits certain conduct in the securities industry—grants district courts “exclusive jurisdiction of violations of this title or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this title.” The Sarbanes-Oxley Act of 2002 is even clearer, giving courts authority to grant “any equitable relief that may be appropriate or necessary for the benefit of investors.”

In its opinion by Justice Sonia Sotomayor, the Supreme Court reasoned that “equity practice long authorized courts to strip wrongdoers of their ill-gotten gains.” That remedy has sometimes gone by different names, such as “accounting” and “restitution,” but courts have always had the power to disgorge “a wrongdoer’s net unlawful profits.” The Court, therefore, held that Congress intended to grant courts the disgorgement power when it passed securities laws such as the Exchange Act and Sarbanes-Oxley.
https://www.theregreview.org/2020/08/03/phatak-consumers-win-protection-securities-fraud/