The Supreme Court issued a ruling Monday that curbs the power of the Securities and Exchange Commission to recoup profits earned in securities fraud.



In a unanimous ruling, the court said the SEC can order companies to pay back illegal profits through disgorgement, but it has to do so within five years of any claim of fraud.



The court’s decision reverses the 10th Circuit Court of Appeals ruling that ordered Charles Kokesh to pay $34.9 million in profits he misappropriated from four business development companies from 1995 to 2009.



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The lower court said disgorgement was neither a penalty nor a forfeiture and therefore not subject to a statute of limitations.But in delivering the opinion of the court, Justice Sonia Sotomayor said SEC disgorgement “bears all the hallmarks of a penalty” for which a 5-year statute of limitations applies: “It is imposed as a consequence of violating a public law and it is intended to deter, not to compensate.”

The SEC often uses disgorgement as means of penalizing those alleged of financial crimes beyond a penalty for specific crime. While the SEC could fine a person or business for violating a crime, disgorgement is meant to seize profits earned from the criminal activity.

The agency fielded 868 enforcement actions against investment advisers and companies, lawyers and firms involved in trading and public finance in 2016, scoring more than $4 billion in penalties and disgorgement.