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Yesterday, a unanimous US Supreme Court held that the 5-year statute of limitations contained in 28 U.S.C. §2462 applies to SEC disgorgement claims. Justice Sotomayor’s opinion in Kokesh v. SEC concluded that since disgorgement involved violations of “public laws” (i.e., the harm was done to the United States, not an individual) & was punitive and non-compensatory, it was a “penalty” subject to the 5-year limitations period in the statute.

Disgorgement is a big part of the SEC’s enforcement arsenal – in fiscal 2016, the SEC obtained disgorgement orders totaling $2.8 billion, compared to only $1.3 billion in civil penalties. Nothing in the Supreme Court’s opinion prohibits the SEC from continuing to seek a disgorgement remedy, but now it’s got to keep an eye on the clock. We’re posting memos in our “SEC Enforcement” Practice Area.

The backstory in the Kokesh case may be more interesting than the opinion itself. I take that back – actually, it’s a lot more interesting.

Compliance Consultants: Coming to An Insider Trading Case Near You?

While we’re on the topic of remedies, this Drinker Biddle blog points out that a unique aspect of the SEC’s insider trading settlement with Leon Cooperman & his Omega Advisors hedge fund was the requirement that the firm retain a “compliance consultant.”  Compliance consultants are a tool that the Division of Enforcement has used in other settings, but this is their first use in an insider trading case.

The blog points out that this requirement sets a precedent that could have a major impact on future cases:

The SEC’s use of this remedy may allow it to “lower the bar” for insider trading investigations knowing that it may be able to obtain settlements such as this which do not result in a suspension or bar. While the avoidance of the suspension or bar is of course paramount to individuals, an undertaking such as this involves an invasive-type relationship with a third party who – while “independent” – may have an allegiance to a regulator or a court.

The costs of a consultant – which are not insignificant – are always borne by the defendant firm, and the blog says it’s not a stretch to describe them as additional/hidden monetary penalties that over a period of years “may increase to hundreds of thousands of dollars or more.” The adoption of this new enforcement tool may turn out to be bad news for individuals and entities whom the SEC may not have considered charging before this settlement.

Our Executive Pay Conferences: Last Chance for 20% Early Bird Discount

Last chance to take advantage of the 20% discounted “early bird” rate for our popular conferences – “Tackling Your 2018 Compensation Disclosures: Proxy Disclosure Conference” & “Say-on-Pay Workshop: 14th Annual Executive Compensation Conference” – to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

Among the panels are:

1. The SEC All-Stars: A Frank Conversation
2. The SEC All-Stars: The Bleeding Edge
3. The Investors Speak
4. Navigating ISS & Glass Lewis
5. Parsing Pay Ratio Disclosures: US-Only Workforces
6. Parsing Pay Ratio Disclosures: Global Workforces
7. Pay Ratio: Sampling & Other Data Issues
8. Pay Ratio: The In-House Perspective
9. Pay Ratio: How to Handle PR & Employee Fallout
10. Keynote: A Conversation with Nell Minow
11. Proxy Access: Tackling the Challenges
12. Clawbacks: What to Do Now
13. Dealing with the Complexities of Perks
14. The Big Kahuna: Your Burning Questions Answered
15. Hot Topics: 50 Practical Nuggets in 60 Minutes

Early Bird Rates – Act by June 9th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a special early bird discount rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by June 9th to take advantage of the 20% discount.

– John Jenkins