Client Alert: National Defense Authorization Act Codifies SEC's Right to Seek Disgorgement; Grants Agency a 10-Year Statute of Limitations in Certain Cases

When the United States Senate overrode the President’s veto of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2021 on January 1, 2021 it, among other things:

  • Provided, for the first time, express statutory authority for the U.S. Securities and Exchange Commission (“SEC”) to pursue disgorgement for violations of the federal securities laws;
  • Expanded the SEC’s statute of limitations to seek disgorgement—from five years to 10 years—for scienter-based claims; and
  • Codified an indefinite tolling of the limitations period while defendants remain outside of the United States.

The expanded authority granted to the SEC by the NDAA will underpin an already more aggressive season of enforcement expected to occur at the SEC under a Biden Administration. This Client Alert outlines the major changes ushered in by the NDAA and some practical implications that companies and individuals should consider in light of these changes.