Disgorgement in Securities Enforcement: A Refresher on Canadian Law Following Sripetch v. SEC

On June 4, 2026, in Sripetch v. Securities and Exchange Commission, the Supreme Court of the United States unanimously held that the Securities and Exchange Commission (SEC) does not need to prove that investors suffered financial loss before obtaining disgorgement orders in enforcement proceedings. The decision resolves a previous split among U.S. lower courts and, in doing so, brings the American and Canadian approaches closer together.

As securities enforcement matters frequently raise cross-border issues, greater alignment between Canadian and U.S. law provides useful clarity where the alleged misconduct, market participants, investors or proceeds span both jurisdictions.

Sripetch and Disgorgement Orders in Canada

Sripetch arose from fraudulent pump-and-dump schemes involving multiple penny stock issuers. When the SEC sought more than US$4.1-million in disgorgement, the defendant argued that, absent proof of actual investor losses, there were no “victims” to justify the award.

Writing for a unanimous Court, Justice Gorsuch dismissed that argument, emphasizing that disgorgement is a gain-based remedy. A wrongdoer cannot retain the proceeds of misconduct simply because a plaintiff cannot demonstrate a corresponding financial loss. As the Court explained, the relevant threshold is interference with a legally protected interest, not proof of pecuniary harm. The Court cautioned, however, that the SEC remains bound by equitable principles and cannot seek “penalties” under the guise of disgorgement.

The reasoning in Sripetch is generally consistent with Canadian jurisprudence. As the Supreme Court of Canada (SCC) held in Poonian v. British Columbia (Securities Commission), the purpose of a disgorgement order is “to compel a wrongdoer to give up any ill-gotten amounts,” with the aim of ensuring wrongdoers do not benefit financially from their own misconduct. Accordingly, the focus is on what the wrongdoer gained, not what any particular investor lost. 

Disgorgement orders in Canada are not capped and are not limited to the wrongdoer’s net profits. Impecuniosity does not reduce or bar such orders, and disgorgement may be enforced through court orders granting access to judgment creditor remedies. Unlike administrative penalties, disgorgement is not extinguished by discharge in bankruptcy and therefore survives insolvency proceedings. Further, as the SCC confirmed in AIC Limited v. Fischer, the use of the disgorgement remedy does not necessarily preclude parallel civil claims, notwithstanding that the practical incentive to pursue separate civil proceedings may diminish.

Finally, the disgorgement remedy is still subject to important limits. Regulators must establish a sufficient nexus between the amounts sought and the misconduct proven, and amounts too remote from the breach are not recoverable. Like the U.S. Supreme Court in Sripetch, Canadian courts have emphasized that disgorgement must remain tied to the wrongdoer’s actual gains and cannot serve as a backdoor channel for broader sanctions.

Differences Between Canadian Jurisdictions

Unlike in the United States, securities enforcement in Canada falls within provincial jurisdiction and is not administered by a national regulator. While there is substantial alignment across the provinces, there are differences in the disgorgement framework to be mindful of in each jurisdiction.

Distribution Mechanisms

One key distinction concerns investor access to disgorged funds. Recently, some provinces have enacted statutory regimes governing the distribution of recovered amounts to affected investors, while others have not yet adopted similar frameworks.

Ontario’s regime is the most recent. In 2025, the Ontario Securities Commission (OSC) finalized rules establishing a structured, pro rata claims process under which disgorged funds are distributed directly to harmed investors, subject to limited exceptions. The framework is intended to provide a more direct, predictable and efficient distribution process and to narrow the gap between regulatory enforcement and private recovery.

Overall, collection of disgorged funds has been a persistent challenge for most Canadian securities regulators. In British Columbia, between 2007 and 2017 — prior to amendments to the British Columbia Securities Act that strengthened the British Columbia Securities Commission’s (BCSC) investigation, enforcement and collection powers — the BCSC collected less than 2% of approximately C$510-million in monetary sanctions imposed. Similarly, the collection rate for monetary sanctions in Ontario — prior to the introduction of its distribution regime — has been reported at approximately 0.6%. Against this backdrop, the introduction and strengthening of distribution regimes in certain provinces provides some assurance that successfully recovered funds will be directed toward affected investors.

Enforcement Orders in Quebec

Disgorgement orders in Quebec are subject to a distinctive securities regulatory scheme. Under s. 262.1 of Quebec’s Securities Act, the Autorité des marchés financiers (AMF) may apply to the Financial Markets Administrative Tribunal for remedial orders. These provisions empower the Tribunal to order a person to remit to the AMF amounts obtained through breaches of securities legislation or, alternatively, to cancel securities transactions or order reimbursement. Section 262.2 establishes a separate mechanism for administering and potentially distributing remitted amounts to individuals who have suffered losses.

Quebec decisions have treated the remedies available under s. 262.1 as functionally equivalent to disgorgement. For example, in Autorité des marchés financiers c. Productions Action Motivation inc., the Tribunal referred to American and Canadian jurisprudence and characterized the remedy as protective and preventive rather than punitive, emphasizing that its purpose is to prevent wrongdoers from retaining amounts obtained through breaches of securities legislation.

Conclusion

Sripetch reinforces a principle that is already familiar in Canadian securities enforcement: disgorgement is directed principally at depriving wrongdoers of amounts obtained through misconduct, not at compensating investor loss. That alignment is useful in cross-border matters, where Canadian and American regulators may be pursuing related misconduct, overlapping respondents and proceeds that move across jurisdictions. 

At the same time, Canada’s federal model means that disgorgement must be understood within the relevant provincial framework. Counsel should remain aware of relevant differences between the American and Canadian approaches when advising clients, both on cross-border and interprovincial matters.

For more information, please contact the authors or any member of our Securities Litigation group. 

Special acknowledgement to Noah Boudreault, Josh Kim and César Mailhot for their contribution to researching this piece.