Asset Protection Limitation Against SEC Judgment

A new client this week wanted help to deal with  a money judgment against him in favor of the U.S. Securities and Exchange Commission. The client’s main assets were a Florida homestead and a company pension. He is a salaried employee and supports his spouse and children.

I have explained in other blog posts that asset protection is designed to protect against civil judgments, but that some federal agencies have collection tools that are more powerful that those available to private creditors. In the case of the SEC, the law makes a distinction between SEC actions for disgorgement and other debts for things such as fines.

Disgorgement is a remedy to recover money that the debtor acquired from victims in the course of securities law violations. Disgorgement is designed to recover unjustly acquired money and to set an example for other potential wrongdoers.

SEC judgments other than disgorgement are treated as ordinary debts. The debtor may exempt from recovery by the SEC of assets which the debtor may exempt under applicable state laws. Disgorgement is an equitable remedy, and the SEC has available extraordinary remedies to seize the debtor’s property to enforce disgorgement orders. A court could hold a debtor in contempt for failure to turn over assets to comply with a disgorgement judgment.

I do not believe the SEC could force the sale of a debtor’s Florida homestead, but the SEC could probably place a lien on the property to recover money when the property is sold or refinanced.  Employee pensions and most other retirement is exempt from disgorgement. Other assets are vulnerable. For instance, the SEC can hold debtor’s in contempt for refusal to turn over money held in offshore accounts or offshore entities.

Bankruptcy does not stay SEC collections. Disgorgement judgments are not dischargeable in a Chapter 7 bankruptcy proceeding.

Although my client’s salary may be exempt from civil collection under Florida’s wage exemption statutes, federal law permits federal government creditors to garnish up to 15% of a debtor’s salary notwithstanding state exemption from garnishment.

Do not expect asset protection to protect you from debts owed the SEC, FTC, the IRS, and many other federal agencies.

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

Jon Alper

Sign up for the latest information.

Get regular updates from our blog, where we discuss asset protection techniques and answer common questions.

Looking for help?

Schedule a phone or Zoom consultation to review your specific situation. We help clients throughout the state of Florida.