Supreme Court Narrows Power of SEC to Recoup Illegal Gains (3)

The U.S. Supreme Court limited the power of the Securities and Exchange Commission to recoup illegal profits from wrongdoers, putting new curbs on one of the agency’s most potent legal weapons.

The 8-1 ruling Monday preserved the SEC’s power to win “disgorgement” in federal court so long as the money is used to reimburse defrauded investors and doesn’t exceed the wrongdoer’s net profits. But the court also suggested that federal law bars awards from going further, blunting a legal tool that critics say the agency has abused.

The SEC typically wins more than $1 billion a year in disgorgement orders ...