Disgorgement

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This article is about the legal term. For other uses, see Disgorge (disambiguation).

Disgorgement is defined by Black's Law Dictionary as "the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion."[1]

Disgorgement is a remedy used in U.S. securities law; for example, disgorgement of short-swing profits is the remedy prescribed by § 16(b) of the Securities Exchange Act of 1934.[2] American Jurisprudence, Second Edition states that:

Disgorgement is an equitable remedy designed to deter future violations of the securities laws and to deprive defendants of the proceeds of their wrongful conduct. Indeed, in the exercise of its equity powers, the district court may order disgorgement of profits acquired through securities fraud. Disgorgement takes into account the fact that the issuance of an injunction, by itself, does not correct the consequences of past activities. This remedy may also be imposed if the court believes that a defendant should not profit from his or her wrong, but equitable considerations indicate that an injunction should not be granted.[3]

Disgorgement is also a remedy for violations of the U.S.'s Commodity Exchange Act. The purpose of such a remedy, as in securities cases, is " to deprive the wrongdoer of his or her ill-gotten gains and to deter violations of the law."[4] However, in such cases, the court may only order disgorgement up to "the amount with interest by which a defendant profited from his or her wrongdoing."[4]

In re Gleeson's Will (124 N.E.2d 624 (Ill. App. 1955)), disgorgement was used as a remedy when the trustee remained as a holdover on the testator's land and acquired a profit.

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References[edit]

  1. ^ Black's Law Dictionary (10th ed. 2014: Bryan A. Garner, ed.) p. 568.
  2. ^ Francis C. Amendola et al., 69A American Jurisprudence (2d ed.) Securities Regulation—Federal, § 1308 (citing 15 U.S.C.A. § 78p(b)).
  3. ^ Francis C. Amendola et al., 69A American Jurisprudence (2d ed.) Securities Regulation—Federal, § 1616 (footnotes omitted).
  4. ^ a b Marie K. Pesando, 73 American Jurisprudence (2d ed.) Stock and Commodity Exchanges § 22 (footnotes omitted).