Boston – October 27, 2017 – International law firm Brown Rudnick filed a class action complaint against the Securities and Exchange Commission yesterday, claiming the agency collected money for fines and penalties that exceeded its authority.

Acting on behalf of lead plaintiff Craig R. Jalbert, trustee of the F-Squared liquidating trust, and others who similarly paid unauthorized penalties to the SEC, Brown Rudnick is seeking the return of funds it claims were collected unlawfully, which could total $14.9 billion.

The complaint follows a June ruling by the Supreme Court in Kokesh v. SEC that disgorgement in SEC actions is, in reality, a penalty. The Supreme Court previously held that a monetary penalty could not be collected without statutory authority.

“The SEC does not have the power to collect extralegal fines under the guise of disgorgement,” said Alex Lipman,  Brown Rudnick partner and former Branch Chief in the SEC's Division of Enforcement. “Congress granted the SEC very broad enforcement powers, but it also established clear limits, including capping the size of monetary penalties and prescribing the form these penalties can take. Despite the SEC's understandable instinct to do all it can to punish wrongdoing, it must stay within those limits.”

The complaint, filed in the US District Court for the District of Massachusetts, alleges that the SEC’s collection of all applicable funds without proper statutory authorization is void under the Administrative Procedure Act.

Jalbert, Brown Rudnick’s lead plaintiff, is the liquidating trustee for F-Squared Investment Management, LLC which paid $30 million in disgorgements the firm says the SEC was not authorized to collect.

“This suit is a natural result of the Supreme Court’s considered decision in Kokesh v. SEC, that ‘disgorgement’ is a penalty subject to the limits on penalties,” said Justin Weddle, Brown Rudnick partner and a former Deputy Chief of Criminal Appeals in the United States Attorney’s Office for the Southern District of New York. “Plain and simple, executive branch agencies cannot collect money without a statutory basis.”

Brown Rudnick has been on the forefront of challenging the proper scope and limits of the SEC’s enforcement actions in recent years, including filing an amicus curia brief with the Supreme Court in Kokesh v. SEC. In that brief, Brown Rudnick argued that the Court should analyze the true character of remedies called “disgorgement” and the relevant statutory authorizations to determine the scope of and limits on those remedies.  Based on its analysis of disgorgement's true character, the Supreme Court found it to be a penalty, requiring application of the statute of limitations.

A copy of the complaint can be found online.  For more information about the firm’s White Collar Defense and Government Investigations practice, visit


About Brown Rudnick LLP

Brown Rudnick, an international law firm with offices in the United States and Europe, represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions. Clients include public and private corporations, multinational Fortune 100 businesses and start-up enterprises. Founded more than 60 years ago, Brown Rudnick has more than 240 lawyers providing advice and services across key areas of the law. Beyond the United States, the Firm regularly serves clients in Europe, the Middle East, North Africa, the Caribbean and Latin America. With its Brown Rudnick Center for the Public Interest, the Firm has created an innovative model combining its pro bono, charitable giving and community volunteer efforts.