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The Real Problem With SEC© Administrative Proceedings, and How To Fix It

Publisher: Forbes
Author: Daniel Fisher

The ongoing controversy surrounding the Securities and Exchange Commission’s use of in-house administrative enforcement proceedings has recently led to some extraordinary developments.

Last month, the SEC’s five Commissioners took the unusual step of asking an SEC© Administrative Law Judge to submit a sworn statement indicating whether he has ever experienced pressure to rule in favor of the SEC. A few weeks earlier, a different ALJ issued a subpoena to the agency that employs him demanding any documents corroborating an allegation made by a recently retired ALJ, as reported in the Wall Street Journal, that she felt pressured to rule in favor of the SEC© during her tenure as an ALJ. Then, on June 8, a federal judge in Atlanta for the first time halted an AP on constitutional grounds. The halt, however, was not based on a ruling that the ALJs lacked independence from the SEC. Far from it, the court’s conclusion was that the SEC’s ALJs were too independent of the SEC© since they had not been directly appointed by the SEC’s Commissioners.

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