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On May 26, 2016, the US Court of Appeals for the Eleventh Circuit issued a decision in SEC v. Graham, curtailing the SEC’s ability to seek disgorgement of allegedly ill-gotten profits beyond five years from the time the claim first accrued.  If the Eleventh Circuit’s approach is ultimately adopted over contrary decisions by other US courts, Graham will influence federal enforcement practices and mitigate the risk of liability arising from violations of US federal securities laws in the distant past.  In particular, this article focuses on how the Graham decision could impact SEC enforcement of the US FCPA and how it could change a company’s assessment of and response to risks arising from past conduct.

The Court of Appeals’ Decision in Graham

In SEC v. Graham, No. 14-13562, the Eleventh Circuit Court of Appeals affirmed in part the US district court’s decision and held that the SEC’s claims for declaratory relief and disgorgement are subject to 28 U.S.C. § 2462’s statute of limitations, which prohibits the US government from bringing suit to enforce any civil fine, penalty or forfeiture after five years from the time the claim first accrued.  The Court of Appeals, exercising de novo review, applied the ordinary and unambiguous meaning to Section 2462’s terms “penalty” and “forfeiture” and concluded that the SEC’s requests for declaratory relief and disgorgement constituted a penalty and a forfeiture, respectively, that were time barred under Section 2462.  Notably, the Court of Appeals explained inter alia:

  • According to its ordinary meaning, a “penalty” is relief that “look[s] backward in time” and “addresses a wrong done in the past.”  In contrast, injunctions—a form of relief not subject to Section 2462’s statute of limitations—are forward looking.  A declaratory judgment that the defendants violated the law is, the Court of Appeals reasoned, backward-looking and a “penalty” prohibited by Section 2462.
  • According to its ordinary meaning, a “forfeiture” occurs “when a person is forced to turn over money or property because of a crime or wrongdoing.”  Forfeiture is synonymous with disgorgement.  For purposes of statutory interpretation, the Court of Appeals rejected the SEC’s technical distinction between these terms in favor of their ordinary meanings, found “no meaningful difference in the definitions of disgorgement and forfeiture” and concluded that disgorgement is barred by Section 2462.

Practical Implications

The clear effect of Graham on securities litigation is to prohibit the SEC from bringing a suit requesting declaratory relief and disgorgement, as well as other penalties and forfeitures, more than five years after the claims accrued.  Under Graham, individuals and companies confronted with an SEC investigation will be able to better assess potential liability as a result of the fixed statute of limitations deadline.  But the Graham decision may have other practical implications for any person or business entity subject to the SEC’s jurisdiction:

  • FCPA Enforcement.  The SEC enforces civil claims under the US FCPA, and often obtains disgorgement that represent a substantial component of FCPA resolutions.  In the top FCPA settlement to date, for example, Siemens paid $350 million in disgorgement to the SEC out of a total $800 million settlement with US authorities.  Moreover, SEC resolutions often involve conduct that occurred years before the resolution.  The impact of Graham may be most acute in the FCPA enforcement context.
  • Compliance Due Diligence.  A clear five-year statute of limitations would reduce the risk of liability arising from more distant wrongdoing—wrongdoing that is often the most difficult and costly to diligence, especially on a tight schedule.  Acquirers and business partners may still wish to review conduct and evidence beyond the statute of limitations in light of the current uncertainty of the law and because such conduct and evidence may be relevant and useful to understanding the specific and overall risk(s) presented by the target or business partner.
  • FCPA Pilot Program.  The certainty that was an aim of the DOJ’s FCPA Pilot Program was undermined by the potential of disgorgement claims reaching back indefinitely—claims that could be brought both by the DOJ (as the Pilot Program required disgorgement) and by the SEC (which is not bound by the Pilot Program).  The holding in Graham helps mitigate, but does not eliminate, the uncertainty arising from disgorgement claims by the SEC, thereby enhancing the effectiveness of the Pilot Program.
  • Choice of Forum.  Recent cases have rejected challenges to the constitutionality of SEC “in-house courts.”  Graham exemplifies how the US federal judiciary can limit the enforcement authority of the SEC over its objection and in contravention of the SEC’s interpretation of federal laws.  As such, and with the assumption that an SEC “in-house court” would more likely reach a decision favorable to the SEC than a US federal court,1 the case highlights the importance of the forum for resolving any dispute.  Graham also highlights the uncertainty that may exist with respect to federal judicial interpretation and review of key provisions of the federal securities laws, potentially motivating the SEC to initiate litigation in more favorable federal circuits, or seek to have resolutions reached with defendants approved by SEC administrative law judges.
  • Tolling Agreements.  To overcome the limitations recognized by Graham, we expect the SEC to continue, and likely increase, its practice of requesting tolling agreements.  Companies and individuals that have already entered into tolling agreements with agencies should review those agreements to determine if any activity, and therefore the proceeds from that activity, fall outside of their current tolling agreements and are beyond the reach of agencies seeking disgorgement.
  • Whistleblowers.  Graham may remove some of the monetary incentives for whistleblowers under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as the application of the statute of limitations may prevent the threshold recovery of over $1 million, in some cases.

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The SEC has 45 days to petition for a rehearing before the Eleventh Circuit, before determining whether to appeal to the Supreme Court.  Notably, the ruling differs from previous rulings from the D.C. Circuit.  See  Riordan v. SEC, 627 F. 3d 1230, 1234 (D.C. Cir. 2010) (holding that the 5 year statute of limitations in § 2462 did not apply to disgorgement as an equitable remedy) (citing Zacharias v. SEC, 569 F. 3d 458, 471 (D.C. Cir. 2009)).  Whether the SEC seeks en banc or US Supreme Court review in Graham or waits for another decision to resolve the circuit split remains to be seen.  The true impact of Graham will only be fully understood over time.  We will continue to monitor Graham and related developments in the federal courts.

[1] See see


Jerome Tomas is Chair of the Firm's SEC and Financial Institutions Enforcement Group and has been recognized by Chambers for White Collar Crime & Government Investigations. He represents multinational companies faced with government investigations and conducts internal investigations to assess and remediate legal and compliance concerns in domestic and global operations. With his experience as a former member of the SEC Division of Enforcement’s Cyberforce, the agency’s internet and cyber fraud unit, Jerome regularly advises companies involved in data security breaches and incident response. Jerome now leads teams of lawyers to address government law enforcement perspectives and where necessary, meet and refute government legal theories of corporate and individual liability head-on, while also being pragmatic and business-oriented for management and boards to compete internationally.



Spencer Churchill is an associate in Baker & McKenzie's Compliance & Investigations Practice Group in Washington, DC. He previously worked with the Firm as a summer associate, assisting in risk assessments and helping to advise clients on compliance with the Foreign Corrupt Practices Act (FCPA) and with state ethics regulations. He has been recognized for his pro bono work in DC, worked as a student lawyer at the Harvard Education Law Clinic, and served on the editorial board of the Harvard Journal of Law & Public Policy.


Eileen Flynn is a litigation associate in Baker McKenzie’s Chicago. She is experienced in domestic and international litigation and arbitration. Eileen is currently a Governing Member of the Chicago Symphony Orchestra. Eileen focuses on representing multinational corporations in commercial litigation and antitrust matters. She has advised clients in multiple industries, including aviation, pharmaceuticals and nuclear medicine.