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The U.S. government is rejecting a recent ruling by a federal judge which found that the Securities and Exchange Commission’s procedures for bringing charges against defendants in its in-house court may violate the Constitution.
In a letter made public on Wednesday evening, the U.S. Justice Department’s civil division, writing on the SEC’s behalf, declared the June 8 decision by an Atlanta-based federal judge to be “wrongly decided” and riddled with flaws.[ID: nL1N0YU225]
The letter marks the first time the U.S. government has formally responded to a decision made on Monday by U.S. District Judge Leigh Martin May in a case involving Charles Hill, a real estate developer.
The SEC© is pursuing civil insider-trading charges against Hill through its own in-house administrative court, instead of through a federal court.
Hill, like many other defendants, is challenging the legal venue, amid concerns it may violate his rights. SEC© administrative trials differ from federal court trials.
They are typically expedited, lack discovery and are initially decided by SEC© administrative in-house judges, who are on the agency’s payroll.
The agencies who employ administrative law judges can seek their removal, but such a move must also be reviewed by the Merit Systems Protection Board.
Hill and other defendants who are challenging the SEC’s use of in-house trials contend the process violates the separation of powers clause in the Constitution because such judges qualify as “inferior officers” subject to removal by the president.
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