‘Obey-the-law” injunctions, favored by regulators such as the U.S. Securities and Exchange Commission (SEC), are incredibly powerful devices that create an albatross hanging over the head of any defendant subjected to them. The purpose of this article is to examine the ability to vacate “obey-the-law” injunctions when they are no longer equitable. In short, a court in its discretion may vacate a permanent injunction if it is no longer equitable due to changes in decisional law, factual circumstances, or the passage of time.

Problematic History

“Obey-the-law” injunctions have been the primary enforcement tool utilized by the SEC since the agencies’ creation. The language of an “obey-the-law” injunction, typically, tracks the SEC’s governing statutes and regulations; once entered by a federal district court, a defendant is permanently enjoined (along with any agent or person acting in concert, directly or indirectly, with one or more of the defendant’s agents) from violating federal securities laws. These injunctions prohibit acts or omissions—identified or unidentified—found to be contrary to any stated provision of the federal securities laws. “Obey-the-law” injunctions impose a limitless, permanent, prohibition on future conduct that may violate a federal securities statute or regulation, regardless of time, place, manner, or relation to the violations initially charged.

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