Wednesday, August 27, 2014

SEC's Use of Administrative Hearings Under Fire

We have written about this before. The SEC, like most administrative agencies, has the ability to bring cases in an administrative proceeding, rather than in court. There are a host of problems with using an administrative proceeding in this manner. Those proceedings are designed for small, "administrative" type matters - not major securities fraud trials where livelihoods are at stake.

English: The U.S. Securities and Exchange Comm...The New York Times has an article on the SEC's administrative hearing process, which is grossly unfair to the respondents - The S.E.C.’s Use of the ‘Rocket Docket’ Is Challenged

Criticism of the S.E.C. for using administrative proceedings was highlighted by Gretchen Morgenson in The New York Times last year regarding the perception of a “home court” advantage for the S.E.C., since the Commission decides whether a case is filed, and the Commission hires, appoints and pays the Administrative Law Judge who hears and decides the case. And any appeal is heard by....the Commission.

The abuse of the administrative hearing process has been a hot topic, as the SEC increases the inappropriate use of the process. A recent op-ed in The Wall Street Journal by Russell G. Ryan, a former assistant director of enforcement at the SEC wrote that “today’s model of penal S.E.C. law enforcement is categorically unsuited for rushed and truncated administrative hearings in which the agency and its own employees serve as prosecutor, judge and punisher.”

Defendants have recently begun to challenge the process. According to the New York Times the defendants are seeking to require the agency to file charges in federal court, where the parties would have the full range of discovery rights. In addition, any determination of a violation would be made by an independent judge and jury rather than an administrative judge employed by the S.E.C.

The NYT has the details The S.E.C.'s Use of the 'Rocket Docket' Is Challenged 

--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and SEC administrative proceedings, For more information call 212-509-6544 or send an email.