In a unanimous decision, the Supreme Court on Monday scaled back the SEC's ability to seize ill-gotten profits from defendant's misconduct.

The Court ruled that the SEC's recovery remedy known as "disgorgement" is subject to a five-year statute of limitations.

Justice Sonia Sotomayor wrote that disgorgement counts as a penalty and is therefore bound by a five-year statute of limitations that already applies to "any civil fine, penalty or forfeiture."

The SEC disgorgement process "bears all the hallmarks of penalty: It is imposed as a consequence of violating a public law and is intended to deter, not to compensate," Sotomayor noted.

The decision marked the second time since 2013 that the Supreme Court has reined in the SEC's enforcement powers.

The case involved New Mexico-based investment adviser Charles Kokesh who was sued by the SEC in 2009 for stealing investors' money. He was later ordered to pay $2.4 million in penalties plus $34.9 million in disgorgement.

In April, the Supreme Court questioned the SEC's recovery plan, how it's implemented and whether it's an appropriate type of punishment that should be contingent on time.