A 2-1 decision by the Fifth Circuit in Jarkesy v. SEC reviewing an SEC enforcement action against a hedge fund manager had held much of the SEC's enforcement apparatus is unconstitutional:
The SEC brought an enforcement action within the agency against Petitioners for securities fraud. An SEC administrative law judge adjudged Petitioners liable and ordered various remedies, and the SEC affirmed on appeal over several constitutional arguments that Petitioners raised. Petitioners raise those same arguments before this court. We hold that: (1)the SEC’s in-house adjudication of Petitioners’ case violated their Seventh Amendment right to a jury trial; (2) Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise the delegated power, in violation of Article I’s vesting of “all” legislative power in Congress; and (3) statutory removal restrictions on SEC ALJs violate the Take Care Clause of Article II.
The jury trial right, the non-delegation doctrine, and the "take care" clause are all way outside my wheelhouse. But I don't see anything in the opinion that limits the application of the analysis of those issues to the SEC. If the decision holds up, it would seem that much of the modern administrative state would be vulnerable.
There is a discussion of the jury trial and ALJ issues in Gideon Mark, SEC and CFTC Administrative Proceedings, 19 U. Pa. J. Const. L. 45 (2016). Available at: https://scholarship.law.upenn.edu/jcl/vol19/iss1/2.
I'll post updates if those with more expertise discuss the matter.
This case is the clearest cert grant in the history of cert grants. https://t.co/qUM13rzEur
— Joshua J. Prince (@JoshuaJPrince) May 18, 2022
My thought is that they may only take the ALJ issue and side with Jarkesy. That way the case is remanded back to the SEC and the Court can duck the bigger issues. I don’t think this is the delegation vehicle they want TBH
— Bradley Larson (@Brad_Larson14) May 18, 2022
