SEC Power to Recoup Illegal Profits Curbed by Top U.S. Court

The U.S. Supreme Court put sharp new limits on a favorite tool used by securities regulators to recoup money from people found to have violated federal laws.

The justices unanimously said the Securities and Exchange Commission is bound by a five-year statute of limitations when it seeks “disgorgement,” or the return of illegal profits. Lower courts had been divided on the issue.

The SEC extracted almost $3 billion in disgorgement payments in 2016 — more than double what it collected in other types of penalties.

The ruling is a victory for Charles R. Kokesh, a New Mexico man found by a ...