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On January 1, 2021, the National Defense Authorization Act, an annual military spending bill, passed into law over the president’s veto. This year’s NDAA contains a section, unrelated to military policy, amending the Securities Exchange Act of 1934 to strengthen the Securities and Exchange Commission’s enforcement powers. The NDAA amendments for the first time create express authority for the SEC to obtain court-ordered disgorgement of unlawful profits; establish statutes of limitations that would give the SEC up to ten years to seek the remedy; suspend the running of the limitations period for defendants located overseas; and create a ten-year statute of limitations for equitable (i.e. non-monetary) remedies. The amendments are a response to court decisions constricting SEC remedies, and among other things partially overrule and/or moot the Supreme Court’s June 2017 decision in Kokesh v. SEC and its June 2020 decision in Liu v. SEC.
On the Federal Trade Commission side, AMG Capital Management, LLC v. FTC – in which the Supreme Court is considering whether the agency’s injunctive (equitable) powers include the authority to demand court-ordered restitution or disgorgement in the absence of specific statutory language to that effect – was argued before the Supreme Court on January 13, with a decision expected by June 2021. The argument sheds light on whether and in what ways the justices are inclined to trim the FTC’s sails when it pursues enforcement action in court.
Daniel R. Walfish and Rachel Penski Fissell of Walfish & Fissell PLLC will discuss:
- Legal context for the NDAA amendments – review of Kokesh and Liu (5 minutes)
- Basic features of the NDAA amendments (5 minutes)
- Questions raised by the NDAA amendments, including the degree to which they apply retroactively, the extent to which the various limitations on the SEC’s “equitable” powers of disgorgement articulated in Liu apply to the new statutory authority, and whether foreign defendants are subject to any statute of limitations when the SEC seeks disgorgement (25 minutes)
- Possible impacts of the NDAA amendments on the SEC’s enforcement program (10 minutes)
- Insights from oral argument and briefing in AMG Capital Management, and possible outcomes of the case (15 minutes)
Program Level: Update
Intended Audience: In-house or outside counsel and accounting and financial professionals who work for or advise companies regulated by or with the potential to be investigated by the SEC or FTC
Advanced Preparation: None