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Federal Judge Halts SEC© Administrative Proceeding On Constitutional Grounds

Publisher: Forbes
Author: Jordan Maglich

In a blow to the in-house administrative proceedings increasingly utilized by the Securities and Exchange Commission, a Georgia federal judge has issued a preliminary injunction based on constitutional grounds that halts a pending administrative action alleging insider trading against a Georgia real estate developer.

The Commission filed an in-house action against Charles L. Hill, Jr., on February 17, 2015, alleging that Mr. Hill profited by nearly $750,000 on a series of stock transactions in mid-2011. While the action was scheduled to go to trial next week, Mr. Hill filed an action last month in Georgia federal court alleging that injunctive relief was proper to halt a process that was constitutionally infirm on multiple accounts. While the Commission has regularly defeated similar challenges as it increasingly eschews court proceedings in favor of its in-house process, Mr. Hill’s victory likely marks the first time a federal court has not sided with the Commission. However, as explained below, the victory is likely to be fleeting.

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