What is Disgorgement?

A disgorgement refers to a type of penalty that is melted out to individuals who have amassed wealth in a wrongful manner. It entails that all the profits or money made from unethical transactions be given up or repaid to those that were negatively affected by the transaction. Disgorgement requires that the gains, profits and all money made from illegal means be repaid. Disgorgement is also a penalty in the United States Securities Law that allows the repayment of ill-gotten profit by investors in the market.

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How is Disgorgement Used? 

Disgorgement is a penalty given to wrongdoers with the aim of providing a remedy to the victim. It is the repayment of money of profits made from illegal businesses and unethical transactions. The Securities Law in the U.S also has provision for disgorgement. Activities such as embezzlement, insider trading, extortion and fraudulent transactions can attract disgorgement as a penalty. 

Added to disgorgement, the Securities and Exchange Commission (SEC) give civil money penalties for companies that violate trading rules. Illegal activities under the Foreign Corrupt Practices Act (FCPA) also attract disgorgement. Individuals who directly participate in illegal activities are required to give up profits made from the activities. Individual who do not directly participate but benefit from the illegal activities are also subject to disgorgement.

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