Recent Amendments to the Securities Exchange Act Pose New Risks for Private Fund Managers

With the recent passage of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (NDAA), Congress sought to restore the SEC’s power to seek disgorgement of ill-gotten gains from violations of securities laws. The NDAA amends the Securities Exchange Act of 1934 to grant the SEC explicit authority to seek disgorgement and to extend the statute of limitations to seek disgorgement for certain violations. A response to the decisions by the U.S. Supreme Court in Kokesh v. SEC and Liu v. SEC, which imposed significant restrictions on the SEC’s ability to seek disgorgement, those amendments could significantly increase the financial exposure of defendants in securities investigations and may shift the SEC’s enforcement priorities. In a guest article, MoloLamken partners Justin V. Shur and Eric Nitz, as well as associate Elizabeth K. Clarke, summarize those changes; assess their impact on private fund managers and others regulated by the SEC; and consider how Kokesh and Liu may yet restrain the SEC’s ability to seek disgorgement even following the NDAA. See “How the SEC May Circumvent the Five-Year Statute of Limitations on Disgorgement Under Kokesh v. SEC” (Jul. 20, 2017).

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