SEC’s New Court Powers Aren’t Going Away

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Publisher: BloombergView
Author: Noah Feldman

Should the Securities and Exchange Commission be allowed to act as prosecutor, judge and jury in pursuing civil penalties against alleged violators of the security laws? If you think the answer is yes, you can only be heartened by Tuesday’s decision by the U.S. Court of Appeals for the D.C. Circuit refusing to hear constitutional challenges to the SEC’s new powers under the Dodd-Frank Act.

The court said that the defendant, George Jarkesy, could still bring his constitutional claims to the courts after the SEC reaches a final decision in this case, which hasn’t happened yet. In theory, the court could then reach a different result when reviewing the constitutional merits of the SEC’s powers.

But reading the tea leaves of the decision, it doesn’t look promising for challengers to the new powers. And that’s a shame. Even though administrative proceedings are a familiar feature of the U.S. legal system, the erosion of the authority of Article III courts should be a meaningful constitutional issue — whether the defendants are Guantanamo detainees or white-collar fraudsters.

Before 2010, the SEC could only impose civil monetary penalties if a defendant chose to keep his or her case before the commission, otherwise it had to go to a federal court. The idea was that penalties are in a sense criminal or at least punitive — and therefore should be the business of ordinary courts, which come with a guaranteed jury trial and all the other procedural protections of the judicial system.

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By : Securex /October 07, 2015 /Compliance /0 Comment