The U.S. Supreme Court ruled on Monday that a five-year limitation period applies to the U.S. Securities and Exchange Commission’s (SEC) efforts to seek disgorgement from alleged securities law violators.

“Because SEC disgorgement operates as a penalty … any claim for disgorgement in an SEC enforcement action must be commenced within five years of the date the claim accrued,” the Supreme Court states in its ruling.

The ruling comes in a case that the SEC brought forward in which a jury ruled that Charles Kokesh had violated securities laws by concealing the misappropriation of $34.9 million (all figures are in U.S. dollars) from four companies between 1995 and 2009. The SEC sought monetary penalties, disgorgement and an injunction barring Kokesh from future violations in the case.

According to the Supreme Court’s decision, the district court ruled that the statutory five-year limitation period applied to the monetary civil penalties, but not to the $34.9-million disgorgement judgment. That court concluded that disgorgement is not a “penalty” under the law, and so, the five-year time limit does not apply. As a result, it imposed a $34.9-million disgorgement judgment, $29.9 million of which resulted from violations outside the limitations period, and ordered Kokesh to pay an additional $18.1 million in prejudgment interest.

That position was upheld on appeal, but now the Supreme Court has overruled the lower courts in a unanimous decision, finding that SEC disgorgement does constitute a penalty.

“First, SEC disgorgement is imposed by the courts as a consequence for violating public laws. … Second, SEC disgorgement is imposed for punitive purposes,” the Supreme Court’s ruling states. “Finally, SEC disgorgement is often not compensatory. Disgorged profits are paid to the district courts, which have discretion to determine how the money will be distributed.”