Fifth Circuit Holds That SEC Administrative Law Courts Are Unconstitutional

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Not a lot of news on this ruling.  It will be interesting as to how this shakes out.

 

Fifth Circuit Holds That SEC Administrative Law Courts Are Unconstitutional

The most recent salvo in the long-running dispute about the constitutionality of the Securities and Exchange Commission’s (SEC) administrative law courts was launched May 18 in a U.S. Court of Appeals for the Fifth Circuit decision, Jarkesy v. SEC, and it’s a bracing read. Unlike prior decisions on the subject, which contented themselves with chipping away at the edges of the SEC’s administrative authority, the Fifth Circuit didn’t pull punches. It held that the SEC’s in-house courts violate a trifecta of constitutional protections: the Seventh Amendment’s right to a jury trial, the prohibition in Article I on excessive delegation of Congress’ “legislative power,” and the restrictions in the “Take Care” clause of Article II as applied to the removal of SEC administrative law judges (ALJs).

 

Jarkesy started out as a run-of-the-mill fraud case against the founder of two hedge funds related to misstatements about the funds’ investment parameters and assets, among other information. The SEC filed the case in its in-house administrative court, and Jarkesy sued in the U.S. District Court for the District of Columbia to enjoin the SEC action because, he said, it violated his constitutional rights. The District Court and, later, the D.C. Circuit Court both rejected the request for an injunction. After Jarkesy lost in the SEC administrative proceeding and on appeal to the full SEC, he appealed to the Fifth Circuit.

 

https://www.natlawreview.com/article/fifth-circuit-holds-sec-administrative-law-courts-are-unconstitutional

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About time!