The Federal Trade Commission (FTC) will have its power to seek disgorgement of ill-gotten gains restored, if a bill that passed the House on Tuesday becomes law.
The Consumer Protection and Recovery Act (H.R.2668) would resurrect the FTC’s ability to seek disgorgement of funds illegally obtained through violation of consumer protection laws, as well as “restitution for losses, rescission or reformation of contracts, refund of money, or return of property.”
Driven by the unanimous Democratic majority, the House passed the bill 221-205, with two Republican representatives also voting yes. The bill now heads to the Senate.
The bill seeks to reverse a unanimous April 2021 Supreme Court decision in AMG Capital Management v. FTC, where the court ruled the agency cannot seek to recoup funds unlawfully obtained by individuals and companies under Section 13(b) of the FTC Act. In the decision, Justice Stephen Breyer noted the FTC can seek restitution under other provisions of the law.
“If the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority,” he wrote.
Now, Congress is attempting to do just that.
The concept of disgorgement—going after the funds obtained by scammers and other lawbreakers—has been a frequent topic of debate at the Supreme Court.
In June 2020, the court ruled the Securities and Exchange Commission (SEC) can seek “equitable relief” in civil proceedings. The question posed to the court in the case, Liu v. SEC, was whether disgorgement is considered equitable relief. In its decision, the majority held a “disgorgement award that does not exceed a wrongdoer’s net profits, and is awarded for victims, is equitable relief.”
Later in 2020, Congress strengthened the SEC’s ability to pursue the return of profits earned in fraudulent schemes as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The bill extended the length of time the agency can look back to seek disgorgement in certain cases to 10 years, after the Supreme Court’s decision in Kokesh v. SEC in 2017 placed a statute of limitation on even the most egregious security law violations at five years.
In June 2020, the Supreme Court declined to hear a case, Monex Deposit Company v. Commodity Futures Trading Commission, regarding the CFTC’s disgorgement powers.
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