Can the SEC force someone to give up money when it cannot identify a single harmed investor?

NCLA is asking the Supreme Court to take Spartan Securities Group v. SEC, a case that has been winding through the courts for years and now presents two significant questions about the reach of federal securities law.

NCLA President and Chief Legal Officer Mark Chenoweth and Senior Litigation Counsel John Vecchione are joined by Senior Litigation Counsel Kara McKenna Rollins, who has worked on the case since 2019.

After a 14-count SEC complaint, NCLA’s clients were found not liable on 13 counts. The remaining dispute has now reached the Supreme Court, where NCLA is challenging both the scope of securities-fraud liability and the SEC’s use of disgorgement.

First, NCLA argues that statements made privately to FINRA and the Depository Trust Company cannot be treated as statements made “in connection with” the purchase or sale of securities when there is no evidence any investor ever saw or heard them. Second, NCLA argues that traditional equitable principles do not allow the SEC to obtain disgorgement when there are no harmed investors and the money instead goes to the U.S. Treasury.

Mark, John, and Kara explain why the case could give the Supreme Court an opportunity to clarify important limits on SEC enforcement—and resolve a question that has been developing in the lower courts for nearly a decade.