A federal judge ruled Monday that the Securities and Exchange Commission’s use of an in-house judge to preside over an insider-trading case was “likely unconstitutional,” a potential blow to the agency’s controversial use of its internal tribunal.
The decision provides an excellent overview of the SEC's administrative hearing process, with all of its warts and deficiencies. The SEC actually argued that the federal court, which has jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States," (
28 U.S.C. § 1331), could not hear the case because it lacked jurisdiction. The court dismissed that argument by reference to Section 1331 as well as
28 U.S.C. § 2201 which authorizes declaratory judgments. “[I]t is established practice for [the Supreme] Court to sustain the jurisdiction of federal courts to issue injunctions to protect rights safeguarded by the Constitution” and “injunctive relief has long been recognized as the proper means for preventing entities from acting unconstitutionally." The citations are in the decision, which is available at
SECLaw.com - Charles L. Hill, Jr. vs. Securities and Exchange Commission.
The decision is directed more toward the process of how the particular
Administrative Law Judge in question was appointed, but hopefully it draws more attention to the SEC's use of its five administrative-law judges to hear its cases, rather than sending them to federal court. For those who have missed it, the
SEC Commissioners decide to bring a case, in their own self-created "court" using rules that they wrote, a prosecutor that they pay, and try the case before a judge that they appoint and pay. And, when there is an appeal from the decision, THEY decide the appeal.
It is no surprise that the SEC has a win-rate of 90 to 100%, depending on the time frame examined. It is time for Andrew J.Ceresney, director of the SEC's Division of Enforcement, to admit that the abuse of the administrative law process is not "eminently proper, appropriate and fair," as he repeatedly claims, and for Mary Jo White, to stop this abuse.
For more information visit
Federal Judge Rules SEC In-House Judge’s Appointment ‘Likely Unconstitutional’.
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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. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email to
mja@sallahlaw.com.
The Financial Industry Regulatory Authority (FINRA) brought in $997 million in net revenues, up from $901 million in 2013. FINRA also lowered its expenses to $965 million, from $999 million in 2013. Revenues and other factors combined to boost FINRA's profit from just $1.7 million in 2013.
