# Amicus Curiae Brief — Kokesh v. Sec. & Exch. Comm'n, 137 S. Ct. 1635 (2017) (No. 16-529) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0720%3A15 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2017 ## Text Pans ot th FILEO No. 16-529 MAR 3 - 201 - STE OPTHE SEEK In The Supreme Court of the Anited States Qreneeeeoe CHARLES R. KOKESH, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent. + On Writ Of Certiorari To The United States Court Of Appeals For The Tenth Circuit + —— = BRIEF OF AMICUS CURIAE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION IN SUPPORT OF PETITIONER ¢-- IRA D. HAMMERMAN MICHAEL J. DELL KEVIN M. CARROLL Counsel of Record SECURITIES INDUSTRY ALAN R. FRIEDMAN AND FINANCIAL ARIELLE WARSHALL KATZ MARKETS ASSOCIATION KRAMER LEVIN NAFTALIS 1101 New York Avenue, NW & FRANKEL LLP Washington, D.C. 20005 1177 Avenue of the Americas (202) 962-7300 New York, New York 10036 (212) 715-9100 mdell@kramerlevin.com Counsel for Amicus Curiae Securities Industry and Financial Markets Association TABLE OF CONTENTS Page INTEREST OF AMICUS CURIAE...................... 1 SUMMARY OF ARGUMENT ......................ccceeees 5 I isccchestincdusdtacctanpcecmtihnabieotaneumactuaniaiins 8 I. II. SECTION 2462’S FIVE-YEAR STATUTE OF LIMITATIONS APPLIES TO SEC AC- TIONS FOR DISGORGEMENT................ A. B. D. The Disgorgement Order is Punitive and a “Penalty” Under Section 2462 ..... The Disgorgement Order is a “Forfei- ture” Within the Meaning of Section SE saieiteicticidaipadbaitemmioincetionddbiekalinaine madras The SEC Has Previously Taken the Position that Disgorgement is a “Pen- NE MN ls ict etetetainsinnnsdecns The Decision Below is Inconsistent i THE TENTH CIRCUIT'S EXEMPTION OF DISGORGEMENT CLAIMS FROM SEC- TION 2462’°S LIMITATIONS WOULD CRE- ATE UNCERTAINTY AND INSTABILITY IN THE FINANCIAL MARKETS ............... A. B. The Decision Below Undermines the Enforcement of the Securities Laws by Promoting Stale Claims ...................... The Decision Below Undermines the Principles of Repose and Certainty..... SI iceincnsiniassicctnbdasendsndioctinncadatsesamenadusignincsats 14 20 21 23 23 i TABLE OF AUTHORITIES Page CASES 3M Co. (Minn. Mining & Mfg.) v. Browner, 17 F.3d 1453 (D.C. Cir. 1994) .......... Ge Rs 22, 24 62 Cases, More or Less, Each Containing Six Jars of Jam v. United States, GRE REC eam ae 18 Adams v. Woods, 6 US. (2 Cranch) 336 (1805)..........................000.. 6, 22 Badaracco v. Comm’r of Internal Revenue, I as doneuaie 17 Bd. of Governors of the Fed. Reserve Sys. v. Di- mension Fin. Corp.., I IE IE innicisiccuiccciecpitsiebensndappuabdipanehiencannneee 17 Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., UE i 24, 29 Coghlan v. NTSB, 470 F.3d 1300 (11th Cir. 2006)..........0000000000. 9,10,11 Collins Sec. Corp. v. SEC, ee Se CP, I UD OD caccicicccandsevensecuacascescceniee 9 CTS Corp. v. Waldburger, SN I I I go ccipsceaaciica cs sccbescletebonen 17, 29 Duncan v. Walker, REE eae eae cae Mena ie 18 Fed. Mar. Comm’n v. Seatrain Lines, Inc., Se SN I cs ears emauainicucnoawadessomidaas 19 ii TABLE OF AUTHORITIES — Continued Page ETC. v. Bronson Partners, LLC, re Be ee te Ge ED vveccccsecicecsccsesecsvecscconcscoser 10 Gabelli v. SEC, 133 S. Ct. 1216 (2013)............... passim Gompers v. Buck’s Stove & Range Co., Ey IIE sissies src rox cuichrdpneniaancnsbedsbeuanieiuenl 10 Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996) .............. 9, 10, 13, 20, 27 Lamie v. United States Trustee, eo a 0s ahs oanbaivtinemmiceaneaiads 18 Market Co. v. Hoffman, IT 5. ccc iestleraan acicabepnaenidsdheubbesabil 18 Pinter v. Dahl, I a delheionileeinaeeiailn 29 Riordan v. SEC, 627 F.3d 1230 (D.C. Cir. 2010) ..................0. 2, 12,13 SEC v. Contorinis, TER Cee Be Ce CAS, BOTA) ............2..00ccccscscescesees 10, 15 SEC v. First City Fin. Corp. Ltd.., re oe Be CER, Gee FED ccnvicceveccceccescceesees 11, 14 SEC v. Fischbach Corp., ee Se CR ANS ED evccnncavcunsscsesccsvescesensecsees 10 SEC v. Gann, 566 F.3d 932 (Sth Cir. 2OOD)..........cccccecrccccecsesccecseees 13 SEC v. Graham, 21 F. Supp. 3d 1300 (S.D. Fla. 2014)................. 16, 19 SEC v. Graham, 823 F.3d 1357 (11th Cir. 2016)........................ passim iv TABLE OF AUTHORITIES — Continued Page SEC v. JT Wallenbrock & Assocs., 440 F.3d 1109 (9th Cir. 2006).................cccccesceceseseee 14 SEC v. Tambone, Be Se Oe Aa BID vinsicveccovvecicseccvossnccovens 2,12 SEC v. Telsey, 144 B.R. 563 (Bankr. S.D. Fla. 1992) ...00 000.0. 20 SEC v. Teo, Fe ae Be Ce GE BIE) no ccccnscenssscissncsencecvdcccenerereis 25 SEC v. Wyly, 860 F. Supp. 2d 275 (S.D.NLY. SAMA pene ahi et oR RTE aeApatene ee om m NR c sae sO] 10 Short v. Belleville Shoe Mfg. Co., Be ee RA COU GARE CP i ceceencs svecconsccsnccvonvsectans 30 Tull v. United States, 8D, TALS mar RSM AI 10, 11 United States v. Kubrick, A I ee io ee Reena 24 United States v. Nat'l Broiler Mktg. Ass’n, WD MT EEE IEE, NUE O Pnccces vescncickcccncvesvcccssctdece 17 United States v. Ursery, gs LR AREER einer artes er 15 United States v. Webber, ae Fee OO C7 Clr, BOOB)..........cccccvcccceccccsecseccscsess 15 Wilson v. Garcia, SN Se IID 5d, sc cuisines sbeaioniedeunwndesscreimensueh 28 Vv TABLE OF AUTHORITIES ~ Continued Page STATUTES AND REGULATIONS ee ee eed cas achnnidasintidendddanaiontonats passim gC, Ecce RES Re Dre SRR p EE Cm REN, fs pete 26 a caliaieiniieslidlaniianl 12 yee Be ESB ER nee nee eee Bree 12 OTHER AUTHORITIES 148 Cong. Rec. 87419 (daily ed. July 26, 2002) CRaNRORNS CE HOR. LAG) cc cvcccccsvccccscsesccsoessccvcosses 26 Arthur B. Laby & W. Hardy Callcott, Patterns of SEC Enforcement Under the 1990 Remedies Act: Civil Money Penalties, 58 Alb. L. Rev. 5 SE csecitecedesbisidsepeasniesindaibatavesnaiuetniontanmacascnsdibeiiates 25 Black’s Law Dictionary (10th ed. 2014)............... 11, 15 Catherine E. Maxson, Note, SEC Enforcement Suits: The Applicability of Section 2462’s Stat- ute of Limitations to SEC Enforcement Suits in Light of the Remedies Act of 1990, 94 Mich. ee a ia cass cetisgrincpacebmiionaamibenansiete 29 Edward Brodsky & Scott A. Eggers, The Statute of Limitations in SEC Civil Enforcement Ac- tions, 23 Sec. Reg. L.J. 123 (1995)...............cceecceeeees 11 Edward Brodsky, Statute of Limitations and Civil Enforcement: Corporate and Securities Litigation, N.Y.L.J., Sept. 21, 1993, at 21............... 15 IRS Chief Counsel Mem. 201619008 (May 6, AES EARS SSRSNSS SR RE REP Bb ASD: OF APOE NON 20 vi TABLE OF AUTHORITIES — Continued 25 Marc I. Steinberg & Ralph C. Ferrara, Secu- rities Practice: Federal and State Enforcement SS EINE dudeciesndssccabentepuindasedsesionciidheniontanerehis Robert F. Zielinski & Vito Petretti, Records Re- tention: What Banks Don’t Know Can and Likely Will Hurt, 119 Banking L.J. 350 (2002) Russell G. Ryan, The Equity Facade of SEC Dis- gorgement, 4 Harv. Bus. L. Rev. Online, at 5 SIIIIINAd acs scocairiscidicimideoneneiidateiadatiiah Samciiegeemnsaliaacnnnsn SEC Div. of Enforcement, Enforcement Manual a a Strengthening the SEC’s Vital Enforcement Re- sponsibilities: Hearing Before the Subcomm. On Securities, Insurance, and Investment of the S. Comm. On Banking, Housing, and Ur- ban Affairs, 111th Cong. 46 (2009) (Statement of Robert Khuzami, Director, SEC) .................. Steven R. Glaser, Statutes of Limitations for Eq- uitable & Remedial Relief in SEC Enforcement Page Actions, 4 Harv. Bus. L. Rev. 129 (2014)............26, 27 1 INTEREST OF AMICUS CURIAE The Securities Industry and Financial Markets Association (“SIFMA”) is an association of hundreds of securities firms, banks and asset managers, including many of the largest financial institutions in the United States. SIFMA’s mission is to support a strong finan- cial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA’s members operate and have offices in all fifty states. SIFMA has offices in New York and Washington, D.C. and is the U.S. regional member of the Global Finan- cial Markets Association. SIFMA often appears as ami- cus curiae in cases that raise legal issues of vital concern to participants in the securities industry.’ 28 U.S.C. § 2462 (1948), the default statute of lim- itations for federal civil enforcement actions, sets a five-year statute of limitations for government actions to enforce “any civil fine, penalty, or forfeiture, pecuni- ary or otherwise”: Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or for- feiture, pecuniary or otherwise, shall not be 1 SIFMA has submitted to the Clerk letters from all parties consenting to this filing. This brief was not authored in whole or in part by counsel for any party. No such counsel or any party made a monetary contribution to fund the preparation or submis- sion of this brief. No person or entity other than SIFMA, its mem- bers, or its counsel made a monetary contribution to the preparation or submission of this brief. 2 entertained unless commenced within five years from the date when the claim first ac- crued. 28 U.S.C. § 2462. In Gabelli v. SEC, 133 S. Ct. 1216 (2013), this Court unanimously held that the five-year limitations period in Section 2462 applies to Securities and Ex- change Commission (“SEC”) claims for civil money penalties. The Court rejected the SEC’s request to add a “discovery rule” that would have exposed defendants to government enforcement actions “not only for five years after their misdeeds, but for an additional uncer- tain period into the future.” /d. at 1223. The Court rec- ognized that statutes of limitations play a vital role in cases where the government seeks to punish alleged wrongdoers by (1) providing repose to potential defend- ants; (2) protecting defendants from the prejudice caused by stale claims and unreliable evidence; and (3) creating certainty about a defendant’s potential li- abilities. Jd. at 1221. Following Gabelli, the Eleventh Circuit held that Section 2462’s five-year limitations period applies to SEC claims for disgorgement, because disgorgement is a “forfeiture” within the plain meaning of the statute. SEC v. Graham, 823 F.3d 1357, 1363 (11th Cir. 2016). However, the Tenth Circuit, in the ruling below, joined the pre-Gabelli opinions of the First and D.C. Circuits that Section 2462 does not apply to the SEC’s disgorge- ment claims. Pet. App. 2a; SEC v. Tambone, 550 F.3d 106, 148 (1st Cir. 2008); Riordan v. SEC, 627 F.3d 1230, 3 1234 (D.C. Cir. 2010). The Tenth Circuit reasoned that disgorgement is traditionally treated as an “equitable” remedy that it is “remedial” and not a “penalty” under Section 2462, and that Section 2462’s reference to for- feiture should be read narrowly to refer to in rem pro- ceedings and not to SEC disgorgement claims. That ruling is inconsistent with Gabelli and the plain lan- guage of Section 2462 and overlooks the bedrock prin- ciples underlying that statute. SIFMA’s members have a strong interest in the Yourt’s application of Section 2462’s five-year limita- tions period to any SEC claims that are functionally fines, penalties or forfeitures — including disgorgement claims — because SIFMA’s members are regulated un- der the securities laws and require certainty and pre- dictability. SIFMA and its members believe the text of Section 2462 and the Court’s rationale for its ruling in Gabelli compel the application of the five-year limita- tions period to SEC disgorgement claims for the follow- ing reasons: First, disgorgement, however labeled, is a punitive remedy that falls within the statute’s express refer- ence to a “penalty” or “forfeiture.” Disgorgement orders are monetary judgments payable to the government to punish a wrongdoer, not compensatory remedies. Their primary function is ensuring that a wrongdoer does not profit and deterring violations of the securities laws. Indeed, the SEC has argued that disgorgement obligations should be treated as non-dischargeable debts precisely because they are punitive and consti- tute a “penalty” or “forfeiture” within the meaning of 4 the Bankruptcy Code. The SEC should not take a con- trary position here. Doing so would undermine Section 2462 and the effective enforcement of the law. The Tenth Circuit’s decision violates the long-settled prin- ciple that words in statutes should be given their ordi- nary meaning. It would allow the SEC to shield actions for a disgorgement penalty or forfeiture from Section 2462’s five-year limitations period merely by charac- terizing the sanction as “equitable.” SIFMA and its members recognize the importance of applying laws as they are written by Congress, not based on subjective assertions of legislative purpose that do not take ac- count of the objectives Congress weighed in drafting particular provisions. That is essential to ensure pre- dictability. And predictability is crucial for the effective and efficient functioning of the markets because it al- lows participants to understand how to comply with the law and how it will be enforced. This Court should restore the focus to Section 2462’s text and correct the Tenth Circuit’s interpretation that strays from its plain language and structure. A failure to do so would risk encouraging courts around the country to depart from text in a misguided effort to divine intent and policy. Second, the Tenth Circuit’s ruling is inconsistent with Gabelli. This Court recognized in Gabelli that settled principles of certainty, repose and elimination of stale claims require the application of Section 2462’s five-year limitations period as a check on the government’s power to punish through civil enforce- ment penalties. Creating a government “exception” to 5 Section 2462 for disgorgement would undermine that ruling. Finally, the Tenth Circuit’s ruling, by permitting the government to seek disgorgement in perpetuity, would create uncertainty and instability in the finan- cial markets. SIFMA’s members rely on the fair, con- sistent and timely enforcement of the securities laws to deter and remedy wrongdoing. One key component is the consistent application of statutes of limitations that are a critical part of those laws. By establishing a definitive outside time limit for exposure to govern- ment enforcement efforts, Section 2462 provides the markets with a measure of certainty and finality, sets a time after which participants are free from lingering liabilities and stale claims, and ensures that claims can be adjudicated based on evidence that is fresh. SIFMA’s members and their investors and customers depend upon such finality in their financial planning and operations. The decision below would undermine the important values and goals that Section 2462 serves and should be reversed. ¢ SUMMARY OF ARGUMENT This appeal presents the fundamental question whether the dispositive principles of law this Court ar- ticulated in Gabelli should be sub silentio limited, and Section 2462’s five-year period for the government to bring an action fer a “penalty” or “forfeiture” should be judicially bypassed when the SEC characterizes its 6 “disgorgement” claim as “equitable.” SIFMA supports Petitioner’s argument that SEC enforcement actions seeking disgorgement are governed by Scction 2462’s five-year limitations period regardless of the manner in which the SEC characterizes them. The disgorge- ment sought by the SEC in this case — grounded on conduct dating back to 1995, fourteen years before the SEC filed suit in 2009 — is both a “penalty” and a “for- feiture” within the plain meaning of Section 2462.’ The ruling below would allow the government to avoid Section 2462’s five-year limitations period merely by labeling the disgorgement it seeks as “equi- table.” That distinction is not tenable. This Court’s de- cision in Gabelli made clear that the core principles underlying Section 2462 (and all statutes of limita- tions) — certainty, repose and elimination of stale claims -- must be applied to government penalty or for- feiture actions. There is nothing about disgorgement claims that makes them less subject to Section 2462 than any other “civil fine, penalty, or forfeiture, pecu- niary or otherwise.” As Chief Justice Marshall ob- served centuries ago, “liJn a country where not even treason can be prosecuted after a lapse of three years, it could scarcely be supposed that an individual would remain forever liable to a pecuniary forfeiture.” Adams v. Woods, 6 U.S. (2 Cranch) 336, 342 (1805). 2 SIFMA does not take a position on the merits of the SEC’s allegations against Petitioner. 7 SIFMA’s members recognize that the appropriate exercise by the SEC of the investigative and enforce- ment powers granted to it by Congress plays an im- portant role in the regulation of the nation’s financial markets. However, Congress has also concluded that the pursuit of old and stale claims poses a particularly acute threat of government overreaching. Accordingly, Congress has established statutes of limitations and repose for actions involving alleged violations of the federal securities laws. Section 2462’s five-year statute of limitations gives the SEC abundant time to discover and investigate violations of the securities laws and bring actions for disgorgement. Belated enforcement efforts after Section 2462’s five-year limitations period has run would have signif- icant adverse consequences for businesses and inves- tors, as well as all market participants. By expanding the government’s ability to impose punitive disgorge- ment sanctions years and decades after alleged mis- conduct, the decision below would create uncertainty, unpredictability and an indefinite threat of exposure to government enforcement actions and thereby under- cut the very purpose of statutes of limitations. This Court should apply Section 2462 in accordance with its text and reverse the decision below. ° 8 ARGUMENT I. SECTION 2462’S FIVE-YEAR STATUTE OF LIMITATIONS APPLIES TO SEC ACTIONS FOR DISGORGEMENT Section 2462 imposes a default five-year limita- tions period whenever the government seeks to enforce “any civil fine, penalty, or forfeiture, pecuniary or oth- erwise.” 28 U.S.C. § 2462. The Tenth Circuit’s ruling is inconsistent with the plain meaning of that statute. It would allow the government, merely by labeling dis- gorgement an “equitable” sanction, to sidestep the lim- itations period in Section 2462 and seek disgorgement for conduct that occurred more than five years earlier — in this case, disgorgement of approximately $35 mil- lion, plus an additional $18 million in prejudgment in- terest, for conduct as long ago as fourteen years before the SEC filed suit.’ But it is the effect of the sanction, not the label-of-convenience attached to it by a govern- ment enforcer, that determines whether Section 2462’s limitations period applies. Section 2462 applies to 3 On October 27, 2009, the SEC filed a civil enforcement ac- tion against Petitioner seeking, inter alia, disgorgement in con- nection with alleged securities law violations between 1995 through 2007. Pet. App. 2a, 21a. There is no dispute that if Section 2462’s limitations period applied, the SEC could not seek relief for the period prior to October 27, 2004 (five years before the SEC filed its complaint). Id. at 26a. In November 2014, following a five- day jury trial, the district court ordered Petitioner to disgorge $34.9 million, of which the SEC conceded only approximately $5 million was the result of conduct that occurred on or after October 27, 2004. Id. at 21a, 45a. The district court ordered Petitioner to pay an additional $18 million in prejudgment interest on the dis- gorgement. /d. at 45a. 9 the disgorgement ruling the SEC obtained against Petitioner below because it is both a “penalty” and a “forfeiture” within the meaning of the statute. A. The Disgorgement Order is Punitive and a “Penalty” Under Section 2462 A “penalty” under Section 2462 is “a form of pun- ishment imposed by the government for unlawful or proscribed conduct, which goes beyond remedying the damage caused to the harmed parties by the defen- dant’s action.” Coghlan v. NTSB, 470 F.3d 1300, 1305 (11th Cir. 2006) (per curiam) (quoting Johnson v. SEC, 87 F.3d 484, 488 (D.C. Cir. 1996)) (emphasis added). As this Court has explained, a penalty is “something im- posed in a punitive way for an infraction of a public law.” Gabelli, 133 S. Ct. at 1223 (quoting Meeker v. Lehigh Valley R. Co., 236 U.S. 412, 423 (1915)). Because the disgorgement order below was “im- posed in a punitive way” at the request of the SEC “for an infraction of a public law,” it is a “penalty” within the meaning of Section 2462. However, the Tenth Cir- cuit ruled to the contrary, after determining that dis- gorgement has traditionally been treated as an “equitable” remedy. Pet. App. 10a-lla. Courts have cautioned, however, that “[s]uch labels are likely to re- flect conclusions rather than analyses, and in any event are not determinative.” Collins Sec. Corp. v. SEC, 562 F.2d 820, 825 (D.C. Cir. 1977), abrogated by Stead- man v. SEC, 450 U.S. 91 (1981). The applicability of Section 2462 depends on the purpose and effect of 10 disgorgement. See Johnson, 87 F.3d at 491 (determin- ing Section 2462’s scope based on “the effect of the SEC’s action”); Coghlan, 470 F.3d at 1305; Johnson, 87 F.3d at 491; see also Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 441 (1911) (“It is not the fact of pun- ishment, but rather its character and purpose that of- ten serve to distinguish between” remedial and punitive relief ). Disgorgement is punitive under Section 2462 par- ticularly where, as here, a defendant is required to dis- gorge more than he actually personally profited. Pet. App. 45a; see, e.g., SEC v. Contorinis, 743 F.3d 296, 309 (2d Cir. 2014) (Chin, J., dissenting) (disgorgement is punitive when “profits were not [defendant’s]” and “were never in his possession or control” because “they were earned by the fund by which he was employed”); SEC v. Wyly, 860 F. Supp. 2d 275, 277 (S.D.N.Y. 2012) (“awards that exceed the defendant’s gains are puni- tive and beyond the court’s equitable powers”); see also Tull v. United States, 481 U.S. 412, 423-24 (1987) (dis- gorgement is “a more limited form of penalty than a civil fine”; court “impose[d] punishment” by ordering disgorgement that exceeded profits). Such disgorgement is designed both to punish a wrongdoer and “to deter” future violations, which is the touchstone of a punitive remedy. See, e.g., SEC v. Fisch- bach Corp., 133 F.3d 170, 175 (2d Cir. 1997); see also ET:C. v. Bronson Partners, LLC, 654 F.3d 359, 373 (2d Cir. 2011) (“[W]hen a public entity seeks disgorge- ment it does not claim any entitlement to particular property; it seeks only to deter violations of the laws ll by depriving violators of their ill-gotten gains.”) (inter- nal quotation marks and alterations omitted); SEC v. First City Fin. Corp. Ltd., 890 F.2d 1215, 1232 n.24 (D.C. Cir. 1989) (“in the context of an SEC enforcement suit, |] deterrence is the key objective”); Edward Brod- sky & Scott A. Eggers, The Statute of Limitations in SEC Civil Enforcement Actions, 23 Sec. Reg. L.J. 123, 135-36 (1995) (“[Dlisgorgement serves a primary func- tion of deterring violations of the securities laws, not compensation.”). Although the SEC attempts to char- acterize disgorgement as an “equitable” remedy, “the language of ‘deterrence’ is not the language of equity.” Id. at 136. Disgorgement is also punitive because, as is true of penalties, the SEC’s primary purpose is not to com- pensate victims. Relief that “goes beyond remedying the damage caused to the harmed parties” is punitive. Coghlan, 470 F.3d at 1305 (internal quotation marks omitted); see also Penalty, Black’s Law Dictionary (10th ed. 2014) (a “penalty” is “[p]unishment imposed on a wrongdoer ... as distinguished from compensa- tion for the injured party’s loss”); 25 Marc I. Steinberg & Ralph C. Ferrara, Securities Practice: Federal and State Enforcement § 4:22 (2016) (collecting authorities and concluding that “the primary purpose of disgorge- ment is punitive: to punish based on violations of the securities laws rather than to compensate the vic- tims”). The SEC’s disgorgement orders “go beyond compensation, are intended to punish, and label de- fendants wrongdoers.” See Gabelli, 133 S. Ct. at 1223; see also Tull, 481 U.S. at 422 (penalties are “intended 12 ” to punish culpable individuals,” not “to extract com- pensation or restore the status quo”). The SEC’s own rules expressly permit disgorged funds to go to the United States Treasury instead of to victims. Although the SEC may compensate victims through a Fair Fund, such funds are permitted only when the SEC obtains civil money penalties which are subject to Section 2462’s five-year statute of limitations. See SEC Rules of Practice: Fair Fund and Disgorgement Plans, 17 C.F.R. §§ 201.1100, 201.1102(b). The Tenth Circuit reasoned, however, that despite these quintessentially punitive characteristics, dis- gorgement is not a “penalty” under Section 2462 because it is “remedial” and “does not inflict punish- ment.” Pet. App. 10a-1la. According to the Tenth Cir- cuit, disgorgement is non-punitive because it “just leaves the wrongdoer in the position he would have oc- cupied had there been no misconduct.” Jd. at 11a (in- ternal citation and internal quotation marks omitted). The court below cited the D.C. and First Circuits’ deci- sions that disgorgement was not a “penalty” under Sec- tion 2462. Id. at 10a-11a; Riordan v. SEC, 627 F.3d 1230, 1234 (D.C. Cir. 2010) (“disgorgement is not a civil penalty” and “not subject to the five-year statute of limitations”) (internal quotation marks omitted); SEC v. Tambone, 550 F.3d 106, 148 (1st Cir. 2008) (Section 2462 “applies only to penalties sought by the SEC, not its request for ... disgorgement”). But the D.C. and First Circuits made those rulings before this Court’s decision in Gabelli and they cannot be reconciled with its teaching that orders that “go beyond compensation, 13 are intended to punish, and label defendants wrongdo- ers” are “penalties” under Section 2462.4 133 S. Ct. at 1223. Moreover, the Tenth Circuit overlooked all of the punitive characteristics of disgorgement. See also Johnson, 87 F.3d at 491 n.11 (“It is clearly possible for a sanction to be ‘remedial’ in the sense that its purpose is to protect the public, yet not be ‘remedial’ because it imposes a punishment going beyond the harm inflicted by the defendant.”). Further, although an SEC enforcement action for disgorgement is sometimes labeled as “equitable” or “remedial,” in practice district courts apply very little discretion in awarding disgorgement. Once a defen- dant is found liable, disgorgement follows almost auto- matically without regard for the damages suffered by a wronged party. Unlike SEC requests for injunctive relief, for which district courts perform a multi-factor analysis to determine whether the SEC has estab- lished a reasonable likelihood of future violations, see, e.g., SEC v. Gann, 565 F.3d 932, 940 (5th Cir. 2009) (“[i]Jn imposing a permanent injunction, the district court must consider a number of factors”), the SEC’s burden when it seeks disgorgement is simply to show * Riordan is also distinguishable because the disgorgement award there could be viewed as compensatory. In Riordan, the de- fendant broker allegedly engaged in a scheme to defraud the citi- zens of the State of New Mexico by paying kickbacks to the state treasurer in exchange for obtaining securities transactions from the New Mexico State Treasurer’s Office. 627 F.3d at 1231. The D.C. Circuit explained that “the disgorged moneys will apparently be returned to the New Mexico State Government and not re- tained by the U.S. Government.” Jd. at 1234, n.1. 14 that the amount to be disgorged “reasonably approxi- mates” the defendant’s illicit profits; the burden then shifts to the defendant to rebut the presumption that the profits are illegal, a “near-impossible” task. SEC v. First City Fin. Corp. Ltd., 890 F.2d at 1231-32 (“sepa- rating legal from illegal profits exactly may at times be a near-impossible task”). Similarly, a defendant is of- ten required to “disgorge” without receiving any credit for expenses. Pet. App. 12a; see also SEC v. JT Wallen- brock & Assocs., 440 F.3d 1109, 1114-15 (9th Cir. 2006) (defendant was not entitled to deduct business and op- erating expenses from the amount of his disgorgement because “it would be unjust to permit the defendants to offset” such amounts); Russell G. Ryan, The Equity Facade of SEC Disgorgement, 4 Harv. Bus. L. Rev. Online 1, 5 (2013), http://www.hblr.org/?p=3528 (dis- gorgement’s “resemblance to a truly equitable remedy largely disappears” and the punitive attributes of dis- gorgement “call into question whether the label of eq- uity accurately describes disgorgement”). Accordingly, when the SEC seeks disgorgement, it seeks a “penalty” and Section 2462 applies. B. The Disgorgement Order is a “Forfeiture” Within the Meaning of Section 2462 There is also no meaningful difference between disgorgement and forfeiture. As the Eleventh Circuit correctly concluded, “under the plain meaning” of Sec- tion 2462, “forfeiture and disgorgement are effectively synonyms.” Graham, 823 F.3d at 1363-64 (“disgorge- ment is imposed as redress for wrongdoing and can be 15 considered a subset of forfeiture”); see also Edward Brodsky, Statute of Limitations and Civil Enforcement: Corporate and Securities Litigation, N.Y.L.J., Sept. 21, 1993, at 21 (“An SEC civil enforcement action seeking disgorgement of illegally-obtained profits is in the nature of a forfeiture action.”). “Disgorgement” is the “act of giving up something (such as profits illegally obtained) on demand or by legal compulsion.” Dis- gorgement, Black’s Law Dictionary (10th ed. 2014). Similarly, a “forfeiture” is the “loss of a right, privilege, or property because of a crime, breach of obligation, or neglect of duty.” Forfeiture, Black’s Law Dictionary (10th ed. 2014). The Tenth Circuit acknowledges this much, Pet. App. 13a (forfeiture and disgorgement “cap- ture similar concepts”). Courts have long used the terms “disgorgement” and “forfeiture” interchangeably to describe orders that require a defendant to give up ill-gotten profits. See United States v. Ursery, 518 U.S. 267, 284 (1996) (forfeiture is “designed primarily to confiscate property used in violation of the law, and to require disgorge- ment of the fruits of illegal conduct”) (emphasis added), United States v. Webber, 536 F.3d 584, 602-03 (7th Cir. 2008) (“Forfeiture, in contrast [to restitution], is puni- tive; it seeks to disgorge any profits that the offender realized from his illegal activity”) (emphasis added); see also Contorinis, 742 F.3d at 310 (Chin, J., dissent- ing) (the terms are “largely the same. . . . [b]oth forfei- ture and disgorgement seek to force a defendant to give up — that is, to forfeit or to disgorge — what he has wrongfully gained;” collecting cases using the terms 16 synonymously). As the district court concluded in Gra- ham, “the disgorgement of all ill-gotten gains realized from the alleged violations of the securities laws — 7.e., requiring defendants to relinquish money and prop- erty — can truly be regarded as nothing other than a forfeiture (both pecuniary and otherwise), which rem- edy is expressly covered by § 2462.” SEC v. Graham, 21 F. Supp. 3d 1300, 1310-11 (S.D. Fla. 2014), aff'd in part and rev’d in part, 823 F.3d 1357 (11th Cir. 2016). There can be no question that the disgorgement order here, which requires Petitioner to give up all ill- gotten gains, is a forfeiture. However, despite acknowl- edging the overwhelming similarities between dis- gorgement and forfeiture, the court below adopted a “narrow” reading of Section 2462 to define forfeiture in a “historical sense.” According to the Tenth Circuit, “forfeiture” as used in Section 2462 refers to in rem proceedings — dating back to the “early days of the Re- public” — to take “tangible property used in criminal activity.” Pet. App. 14a. In substituting its own view of the purpose of Section 2462 for the text of the statute, the Tenth Circuit pointed to historical examples of for- feiture such as “the seizure of ships engaged in piracy” and illegal “distilleries,” and reasoned that disgorge- ment “does not fit in that company.” /d. at 14a. However, these efforts to artificially distinguish “dis- gorgement” from “forfeiture” flout Congressional in- tent as expressed in the plain language of Section 2462. The Tenth Circuit’s decision violates the long-set- tled principle that words in statutes “should be given 17 their ordinary, popular meaning unless Congress clearly meant the words in some more technical sense.” United States v. Nat'l Broiler Mktg. Ass’n, 550 F.2d 1380, 1386 (5th Cir. 1977), aff'd, 486 U.S. 816 (1978); see Graham, 823 F.3d at 1364 (“We find no indication that in enacting § 2462’s widely applicable statute of limitations, Congress meant to adopt the technical def- initions of forfeiture and disgorgement the SEC urges over the words’ ordinary meanings.”). A dominant theme of this Court’s jurisprudence is that legislation must be enforced in accordance with its plain lan- guage, and not based on a judicial assessment of how best to effectuate a perceived legislative purpose. When Congress crafts legislation and statutes of limi- tations, it inevitably balances competing policy goals. See, e.g., CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2185 (2014) (“[AJlmost every statute might be de- scribed as remedial in the sense that all statutes are designed to remedy some problem,” but “‘no legislation pursues its purposes at all costs.’” (quoting Rodriguez uv. United States, 480 U.S. 522, 525-26 (1987) (per cu- riam))); see also Bd. of Governors of the Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 374 (1986) (“[T]he final language of the legislation may reflect hard-fought compromises. Invocation of the ‘plain pur- pose’ of legislation at the expense of the terms of the statute itself takes no account of the processes of com- promise and, in the end, prevents the effectuation of congressional intent.”). This Court has repeatedly re- minded courts not to “rewrite a statute because they might deem its effects susceptible of improvement” to carry out perceived legislative purposes. Badaracco v. 18 Comm’r of Internal Revenue, 464 U.S. 386, 398 (1984). Untethering statutory construction from the plain lan- guage of the statute, and relying instead on subjective judicial speculation about how best to accomplish Con- gressional policy, would infringe on the role of our elected legislators. See Lamie v. United States Trustee, 540 U.S. 526, 538 (2004). Moreover, by limiting the definition of forfeiture in the statute to in rem proceedings, the Tenth Circuit ef- fectively erased the words “pecuniary or otherwise” from Section 2462. While in rem proceedings are by definition actions against “tangible property,” Pet. App. 14a, “pecuniary” actions are monetary. If Congress had intended forfeiture to apply only to non-pecuniary in rem actions, it would not have included the phrase “pe- cuniary or otherwise” immediately following the words “any civil fine, penalty, or forfeiture” in Section 2462. The Tenth Circuit erred by impermissibly treating the words “pecuniary or otherwise” in the statute as super- fluous. See, e.g., Duncan v. Walker, 533 U.S. 167, 174 (2001) (“It is our duty to give effect, if possible, to every clause and word of a statute. ... We are thus reluctant to treat statutory terms as surplusage in any setting.”) (internal citation and quotation marks omitted); Market Co. v. Hoffman, 101 U.S. 112, 115-16 (1879) (“As early as in Bacon’s Abridgment, sect. 2, it was said that ‘a statute ought, upon the whole, to be so con- strued that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.’”); see also 62 Cases, More or Less, Each Containing Six Jars of Jam v. United States, 340 U.S. 593, 596 (1951) 19 (explaining that courts must look to “what Congress has written. ... neither to add nor to subtract, neither to delete nor to distort”). As the Eleventh Circuit ex- plained in rejecting the SEC’s artificial attempt to dis- tinguish forfeiture and disgorgement by focusing on technical definitions, rather than the words’ ordinary meanings: “Had Congress wished unique or special- ized meanings to attach to any of these terms, it read- ily could have taken the obvious and usual step either of including a specialized meaning in the definitions section of the statute or by using clear modifying lan- guage in the text of the statute.” Graham, 823 F.3d at 1364 (internal citation and question marks omitted). Furthermore, as this Court has explained, “catchall” provisions like Section 2462 “are to be read as bringing within a statute categories similar in type to those specifically enumerated.” Fed. Mar. Comm’n v. Seatrain Lines, Inc., 411 U.S. 726, 734 (1973). The Tenth Circuit’s narrow (and arcane) reading of Section 2462 makes little sense because the statute “applies to a wide variety of agency actions and contexts.” Gra- ham, 823 F.3d at 1364. Whether forfeiture and dis- gorgement are synonymous, or disgorgement is a subset of forfeiture, the effect on a defendant is the same. Thus, the most natural reading of Section 2462 is that disgorgement is a “forfeiture.” See Gabelli at 1220. “To hold otherwise would be to open the door to Government plaintiffs’ ingenuity in creating new terms for the precise forms of relief expressly covered by the statute in order to avoid its application.” Gra- ham, 21 F. Supp. 3d at 1311. 20 C. The SEC Has Previously Taken the Position that Disgorgement is a “Pen- alty” or “Forfeiture” It is incongruous for the SEC to deny that dis- gorgement is a “civil fine, penalty or forfeiture” under Section 2462 when it has asserted that disgorgement is a “penalty” or “forfeiture” in other contexts. In SEC v. Telsey, the SEC argued that a disgorgement order is a “fine, penalty or forfeiture” within the meaning of the Bankruptcy Code and not a debt subject to discharge. 144 B.R. 563, 564-65 (Bankr. S.D. Fla. 1992) (“The S.E.C. contends that its debt arising from the District Court [disgorgement] order is excepted from discharge ... to the extent such debt is for a fine, penalty, or for- feiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.”). The Telsey court was persuaded that “the deter- rence purpose of the disgorgement order [is] suffi- ciently penal to characterize it as a ‘fine, penalty, or forfeiture,” and therefore not dischargeable in bank- ruptcy. /d. at 565; see also Johnson, 87 F.3d at 484 n.10 (“The SEC’s own position on what constitutes a pen- alty appears to vary with the context.... The SEC never explains why the position it took in [Telsey] should not apply here as well.”).° * The IRS has taken a similar position that a disgorgement payment by an entity-taxpayer to the SEC for alleged FCPA vio- lations is “primarily punitive” and is therefore a “fine or similar penalty paid to a government for the violation of any law” that is nondeductible under Section 162(f) of the Tax Code. See IRS Chief Counsel Mem. 201619008, at 8, 10 (May 6, 2016) (disgorgement in 21 D. The Decision Below is Inconsistent with Gabelli The ruling below should also be reversed because it conflicts with the principles set out by the Court in Gabelli. In Gabelli, this Court unanimously held that Section 2462 bars the SEC from seeking civil monetary penalties for violations that occurred more than five years before the SEC brought an enforcement action. 133 S. Ct. 1216, 1220 (2013). The Court explained that Section 2462 sets a fixed date when exposure to government enforcement efforts ends, and thereby advances the basic purpose of limitations periods: “re- pose, elimination of stale claims, and certainty about a plaintiff’s opportunity for recovery and a defendant's potential liabilities.” Jd. at 1221 (citing Rotella v. Wood, 528 U.S. 549, 555 (2000)). Gabelli explicitly rejected the SEC’s position that a “discovery rule” should apply to Section 2462. As the Court made clear, the SEC’s ap- proach would have eroded the core principles of all statute of limitations provisions. Gabelli at 1221. While the applicability of Section 2462 to SEC claims for disgorgement was “not before” the Court in Gabelli, nothing in the Court’s opinion suggests that its rationale is limited to civil money penalties. And nothing in the opinion suggests that the “vital” concerns expressed by the Court about repose, stale federal securities law cases may be primarily punitive or primar- ily compensatory for federal tax law purposes depending on the facts and circumstances of a particular case. When disgorgement does not compensate victims, it should be treated as a non-deduct- ible penalty). 22 evidence, and uncertainty would be somehow remediated simply because the SEC styles its dis- gorgement claim as “equitable” rather than punitive. “Given the reasons why we have statutes of limita- tions, there is no discernable rationale for applying § 2462 when” the SEC seeks a monetary penalty “but not when” it seeks disgorgement. 3M Co. (Minn. Min- ing & Mfg.) v. Browner, 17 F.3d 1453, 1457 (D.C. Cir. 1994). “The concern that after the passage of time ‘evidence has been lost, memories have faded, and wit- nesses have disappeared’ pertains equally to” civil money penalties and disgorgement. /d. (quoting Order of R.R. Telegraphers v. Ry. Express Agency, Inc., 321 U.S. 342, 349 (1944)). The Tenth Circuit’s holding would leave defendants exposed to government dis- gorgement claims “not only for five years after their misdeeds, but for an additional uncertain period into the future.” Gabelli, 133 S. Ct. at 1223; see supra at 1- 2. As Chief Justice Marshall observed, such a result would be “utterly repugnant to the genius of our laws.” Gabelli, 133 S. Ct. at 1223 (quoting Adams, 6 U.S. (2 Cranch) at 342). The logical ramification of Gabelli is that the SEC may not impose punitive sanctions like disgorgement if those sanctions are based on claims that accrued more than five years before the SEC initiated an en- forcement action. The Court should make clear that it meant what it said in Gabelli and that the central pur- pose of Section 2462 should not be undermined by cre- ating an indefinite threat of government enforcement actions. 23 If. THE TENTH CIRCUIT’S EXEMPTION OF DISGORGEMENT CLAIMS FROM SECTION 2462’°S LIMITATIONS WOULD CREATE UNCERTAINTY AND INSTABILITY IN THE FINANCIAL MARKETS Applying Section 2462 to all SEC enforcement ac- tions makes sense and advances the important policy reasons for statutes of limitations that this Court ar- ticulated in Gabelli. The bright line Congress drew when it enacted Section 2462’s five-year limitations period serves a vital role in the administration of jus- tice and provides markets with stability and certainty. Requiring the SEC to bring disgorgement claims within five years of an alleged violation promotes ef- fective deterrence, protects against the specter of stale claims, and provides fairness and efficiency in the securities markets. The Tenth Circuit’s ruling would undermine these important objectives by permitting the government to bring civil disgorgement claims in perpetuity. A. The Decision Below Undermines the Enforcement of the Securities Laws by Promoting Stale Claims The Tenth Circuit’s exemption of claims for dis- gorgement penalties and forfeitures from the limita- tions of Section 2462 has the potential to degrade the efficient enforcement of the securities laws. This Court explained in Gabelli that statutes of limitations pro- vide “security and stability to human affairs” and are “vital to the welfare of society.” 133 S.Ct. at 1221 24 (internal quotation marks and citations omitted). As this Court has long recognized, “it does not follow that” extending the reach of civil remedies in the securities laws “better servels]” “the objectives of the statute.” Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 188 (1994) (“mak[ing] the civil remedy more far reaching. ... may disserve the goals of fair dealing and efficiency in the securities markets”). Section 2462’s limitations period protects market participants from the problems of proof that would arise if long-delayed litigation were permissible. Dis- gorgement claims based on conduct that occurred more than five years before the claims were brought under- mines the goals of fairness and efficiency in the secu- rities markets. Cases brought years or decades after the fact become shrouded in faded memories and lost evidence. As this Court has cautioned, when claims are “allowed to slumber” for that long, often “evidence has been lost, memories have faded, and witnesses have disappeared.” Gabelli, 133 S. Ct. at 1221 (quoting R.R. Telegraphers, 321 U.S. at 348-49). Limitations periods thus “promote justice by preventing surprises through the revival of [such] claims.” Jd.; see also United States v. Kubrick, 444 U.S. 111, 117 (1979) (“‘[The right to be free of stale claims in time comes to prevail over the right to prosecute them.’” (quoting R.R. Telegraphers, 321 U.S. at 349); 3M Co., 17 F.3d at 1457 (“Statutes of limitations also reflect the judgment that there comes a time when the potential defendant ‘ought to be se- cure in his reasonable expectation that the slate has 25 been wiped clean of ancient obligations.’”) (internal citation omitted); Arthur B. Laby & W. Hardy Callcott, Patterns of SEC Enforcement Under the 1990 Remedies Act: Civil Money Penalties, 58 Alb. L. Rev. 5, 52 (1994) (“As the SEC ... bring|s] cases that are increasingly distant from the time of the alleged violations, faded memories and the disappearance of evidence may make it harder for the SEC to prove violations (and harder for some innocent defendants to demonstrate their blamelessness)”). These concerns ring especially true in the securities industry, which experiences high employee turnover and cyclical downsizing. When the SEC pursues an enforcement action more than five years after an event has occurred, the relevant employ- ees are less likely than in other industries to be per- forming the same job for the same employer, which makes investigations and trials more costly and less reliable. Section 2462’s five-year limitations period is therefore essential to the functioning of affirmative de- fenses under the securities laws, which could other- wise be undermined by the passage of time. This is particularly true of disgorgement claims, where the SEC is required to proffer only a “reasonable approxi- mation” of profits to create a “presumption of illegal profits.” SEC v. Teo, 746 F.3d 90, 105 (3d Cir. 2014). Ev- identiary problems associated with stale claims are particularly acute for defendants in rebutting this pre- sumption. The ability to rebut disgorgement claims with viable evidence deteriorates with the passage of time. By subjecting defendants to the indefinite threat 26 of stale claims, the Tenth Circuit’s ruling would deprive market participants the opportunity to gather exculpatory evidence and mount a defense while facts are still fresh.® Setting a fixed date when exposure to government enforcement efforts ends no matter what relief is re- quested has the further salutary effect of encouraging the SEC to focus on its central “mission” to “protect investors and the markets by investigating potential violations of the federal securities laws and litigating the SEC’s enforcement actions.” SEC Div. of Enforce- ment, Enforcement Manual at 1 (2016). As the SEC has acknowledged, “|s|wift investigations generally are most effective and enhance the public interest.” Id. at 32. “The public does not benefit from a framework in which the SEC can wait as long as it pleases to impose significant sanctions.” Steven R. Glaser, Statutes of Limitations for Equitable and Remedial Relief in SEC ® The risk of stale and lost evidence for claims based on con- duct that occurred more than five years ago is further com- pounded by the fact that records retention policies for financial services firms often correlate to the time periods in relevant stat- utes and regulations, which — like Section 2462 — generally do not exceed five years. See, e.g., 12 C.F.R. § 219.24 (records retention period for domestic and international funds transfers and trans- mittals of funds is five years); Robert F. Zielinski & Vito Petretti, Records Retention: What Banks Don’t Know Can and Likely Will Hurt, 119 Banking L.J. 350, 351-52 (2002); 148 Cong. Rec. 87419 (daily ed. July 26, 2002) (Statement of Sen. Leahy) (“[I]t is in- tended that the SEC promulgate rules and regulations that re- quire the retention of such substantive material ... for such a period as is reasonable and necessary for effective enforcement of the securities laws ... most of which have a five-year statute of lunitations.”). 27 Enforcement Actions, 4 Harv. Bus. L. Rev. 129, 155 (2014). It is reasonable to “expect the SEC to focus its efforts on bringing claims in a timely fashion” to pro- tect market participants from being confronted with old and stale claims brought by the SEC decades after the alleged misconduct. Jd. A rule that allows the gov- ernment to sleep on its rights for years or decades and then bring a disgorgement claim when a defendant's potential defenses have all but disappeared promotes the wrong kind of incentives and defangs an important check on government enforcement. The passage of time also diminishes the deterrent effect of disgorgement. See Johnson, 87 F.3d at 492 n.14 (“[T]he SEC argues that enforcing § 2462 would ‘hobble efforts to prevent future harm to the public.’ It is equally likely, however, that once the SEC has de- layed more than five years in proceeding against a |de- fendant] it considers a grave threat to the public, the bulk of the harm has already been done.” (internal ci- tation omitted)); see also Strengthening the SEC’s Vital Enforcement Responsibilities: Hearing Before the Sub- comm. On Securities, Insurance, and Investment of the S. Comm. On Banking, Housing, and Urban Affairs, 111th Cong. 46 (2009) (Statement of Robert Khuzami, Director, SEC) (“[I)f there is a wide gap between con- duct and atonement, then the message — to the invest- ing public that the SEC is vigilant and effective, as well as the message to those who might themselves be con- sidering a step outside the law — is diluted... . |T]he opportunity to achieve a permanent change in behav- ior and culture is greatly reduced.”). 28 B. The Decision Below Undermines the Principles of Repose and Certainty Disgorgement awards gencrally dwarf the statu- tory penalties imposed in government enforcement ac- tions. In 2015 alone, the SEC obtained $1.2 billion in civil monetary penalties but an additional $3 billon in disgorgement orders. See SEC, Select SEC and Market Data Fiscal 2015, 2 (2016).’ Repose and certainty are accordingly especially important for disgorgement claims because they expose defendants to potentially crippling monetary awards. But the Tenth Circuit’s construction of Section 2462 would create a permanent cloud of potential liability over financial market participants. Absent a “fixed date when exposure to Government enforcement efforts ends,” businesses, in- vestors, and securities professionals are stripped of the repose that statutes of limitations are designed to pro- vide. See Gabelli, 133 S. Ct. at 1221. Such never ending liability would create significant uncertainty for those whose careers, reputations and financial security are at stake. The Tenth Circuit’s ruling would have a destabi- lizing effect on the efficient functioning of the securi- ties markets by eliminating predictability and undermining the ability of industry participants to act based on reasoned assumptions about the possibility of disgorgement claims and liability. See Wilson v. Garcia, ' The district court here ordered Petitioner to pay a mone- tary penalty of $2.4 million. That was a small fraction of the dis- gorgement award of approximately $35 million plus an additional $18 million in prejudgment interest. Pet. App. 45a. 29 471 U.S. 261, 275 n.34 (1985) (“Defendants cannot calculate their contingent liabilities, not knowing with confidence when their delicts lie in repose.”). It has long been recognized that securities law is “an area that demands certainty and predictability.” Pinter v. Dahl, 486 U.S. 622, 652 (1988). Claims that can be made forever are “not a ‘satisfactory basis for a rule of liability imposed on the conduct of business transac- tions.’” Cent. Bank of Denver, N.A., 511 U.S. at 188 (quoting Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 755 (1975)). The uncertainty “can have ripple effects” across the financial markets, “increas[ing] costs incurred by professionals” which then “may be passed on to their client companies, and in turn in- curred by the company’s investors, the intended bene- ficiaries of the statute.” Jd. at 189. Such open-ended liability increases the cost of business transactions, making due diligence more difficult and burdening successor corporations with a predecessor’s miscon- duct. See Catherine E. Maxson, Note, SEC Enforce- ment Suits: The Applicability of Section 2462’s Statute of Limitations to SEC Enforcement Suits in Light of the Remedies Act of 1990, 94 Mich. L. Rev. 512, 529 (1995) (“If SEC enforcement suits could impose staggering fines on corporate entitics at any time, the transaction costs of contracting would increase as parties would have to compensate for this risk of liability.”). In contrast, the enforcement of Section 2462 in SEC disgorgement actions, by eliminating “pro- tracted liability,” CTS, 134 S. Ct. at 2183, adds predict- ability that serves the important purpose of enabling 30 financial institutions to deploy for productive use capital that otherwise might be tied up indefinitely in reserves to cover potential liability. It protects new shareholders, bondholders and management from lia- bility for conduct that occurred at a time when they were not associated with the business. And it prevents strategic delay or efforts to seek “recoveries based on the wisdom given by hindsight” and the “volatile” prices of securities. Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385, 1392 (7th Cir. 1990). Applying Section 2462’s five-year statute of limi- tations to claims seeking disgorgement serves a vitally important role in the administration of justice and brings stability and certainty to the law. Like the posi- tion of the SEC that this Court rejected in Gabelli, the ruling below would frustrate tne goals of repose and certainty underlying Section 2462. It is vital to the se- curities industry and financial markets that laws are construed and applied as enacted by Congress and that statutes of limitations are enforced. In the absence of a limitations period for disgorgement, market partici- pants lack the certainty of knowing that at some point their conduct will be free from scrutiny. Businesses and individuals would never be free from potential SEC claims, so long as the SEC labels its sanctions as “equitable.”® 8 Because Section 2462 is also a default statute of limitations for the government outside the securities context, the impact of the Tenth Circuit’s decision extends beyond SEC proceedings. 3] CONCLUSION For the foregoing reasons, the judgment of the United States Court of Appeals for the Tenth Circuit should be reversed. March 3, 2017 Respectfully submitted, IRA D. HAMMERMAN MICHAEL J. DELL KkrVIN M. CARROLL Counsel of Record SECURITIES INDUSTRY ALAN R. FRIEDMAN AND FINANCIAL ARIELLE WARSHALL KATZ MARKETS ASSOCIATION KRAMER LEVIN NAFTALIS 1101 New York Avenue, NW & FRANKEL LLP Washington, D.C. 20005 1177 Avenue of the Americas (202) 962-7300 New York, New York 10036 (212) 715-9100 mdell@kramerlevin.com Counsel for Amicus Curiae Securities Industry and Financial Markets Association — For example, it could affect possible claims by the Commodity Futures Trading Commission in the futures and derivatives industry and the Federal Energy Regulatory Commission in the energy industry. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0720%3A15. Public record. Not legal advice.