Advised on tax implications of structure of a potential $9M settlement in an SEC action. NYC litigation boutique about to settle significant SEC action by which SEC proposed a civil money penalty and disgorgement. We advised that the civil penalty element would not be deductible for federal income tax purposes and that the IRS viewed disgorgements as not deductible unless primarily compensatory (as opposed to punitive). Suggested that settlement agreement expressly provide that the disgorgement be paid to a Fair Fund created pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended for the benefit of injured investors.
