U.S. Supreme Court sets limits on SEC's power to recover ill-gotten gains

June 22 (Reuters) - The U.S. Supreme Court on Monday placed limits on the Securities and Exchange Commission’s practice of forcing defendants to surrender profits obtained through fraud as part of its enforcement of investor-protection laws in federal courts, but stopped short of disallowing such action.

The case focused on the agency’s use of the federal judiciary to seek disgorgement, a part of SEC’s civil enforcement arsenal aimed at passing on funds acquired in fraudulent schemes to the original investors. The justices, in a 8-1 ruling, allowed such action under certain conditions.

The decision was issued in an appeal by a California couple, Charles Liu and Xin Wang, of a 2016 civil action brought against them by the SEC in federal court. (Reporting by Andrew Chung in New York and Lawrence Hurley in Washington; Editing by Will Dunham)