SEC Power to Recoup Illicit Profits Challenged at Supreme Court

Three times over the past decade, the US Supreme Court has cut the Securities and Exchange Commission’s ability to extract millions of dollars from alleged wrongdoers.

Critics of the commission say it’s not enough. In arguments Monday they are asking the justices to put new limits on “disgorgement,” one of the SEC’s most potent enforcement tools, designed to recoup illicit profits and return them to victims.

The dispute will shape a panoply of SEC cases in which victims aren’t easy to pinpoint, from low-profile record-keeping violations to major insider trading allegations. The SEC used disgorgement to secure orders for ...