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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