Amicus Brief: Charles C. Liu and Xin Wang v. Securities and Exchange Commission


It is undisputed that the “disgorgement” remedy appears nowhere in the SEC’s enabling statutes. History reveals that the disgorgement remedy was created and expanded by an strategic enforcement and litigation process allowing SEC to arrogate to itself powers not granted by Congress. This process built on each victory with increasing overreach. What was once deemed “ancillary” relief has expanded, as extra-statutory powers are wont to do, to dwarf the actual relief provided by statute, and to make a mockery of what disgorgement means in equity even if such remedy was provided by statute. This plan was observed and followed by other agencies, particularly the Federal Trade Commission (FTC), and error has flowed from the SEC’s overreach to other parts of the Government. This invasive weed was not nipped in the bud and so must be uprooted in its present exotic bloom.

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CASE: Charles C. Liu and Xin Wang v. Securities and Exchange Commission


DOCUMENT: No. 18-1501

COUNSEL OF RECORD: John J. Vecchione

FILED: December 23, 2019


December 23, 2019 | Amicus Curiae Brief of the New Civil Liberties Alliance in Support of Petitioners
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December 23, 2019 | SCOTUS Urged to End SEC Use of Legal Remedies Not Prescribed by Statute

WASHINGTON, D.C., December 23, 2019 – An amicus brief filed today by the New Civil Liberties Alliance (NCLA) urges the U.S. Supreme Court to reverse a Ninth Circuit decision that endorses the Security and Exchange Commission’s routine use of abusive legal remedies not authorized by relevant federal statutes.In Liu v. Securities and Exchange Commission, the high court is asked whether the SEC may pursue “disgorgement” as equitable relief for securities law violations even though the court has previously determined that disgorgement is a “penalty,” and the statutory remedies do not authorize such penalties.

“Little by little, focusing on bad actors rather than the law,” began NCLA senior litigation counsel John Vecchione, “the SEC and other federal agencies have steadily worked to expand their power and authority far beyond what elected lawmakers in Congress have allowed.

“In the particular case of the SEC, it has pursued a deliberate, bootstrapping strategy over several decades that cultivates judges’ outrage over defendants’ misconduct at the expense of temperance and the rule of law,” Vecchione continued.

The brief identifies a 1970 decision by the Second Circuit in SEC v. Texas Gulf Sulphur Co. that has served as a foundational precedent for the acquisitive agency’s campaign to wield “often crippling and constitutionally questionable disgorgements as a cudgel against defendants.

“The SEC took that decision and has since charged ahead, despite a 1994 high court admonition in Central Bank of Denver making clear that statutory text strictly governs the scope of agency authority, and that such authority cannot be implied. The SEC has many statutory powers including civil penalties, and can even pursue disgorgement administratively, but unless Congress acts it should be held to the statutes on the books.

“Even more recent high court decisions have signaled a fresh willingness to rein in unelected regulators’ usurpations of Congress’s sole lawmaking authority, and NCLA hopes the justices will seize the opportunity presented by Liu to strike a more definitive blow against the administrative state,” Vecchione concluded.


NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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