Supreme Court tackles second major battle against administrative state this term

The Supreme Court Considers SEC’s Powers in Major Case

The Supreme Court ⁢is set to examine the Securities and‌ Exchange ‍Commission’s (SEC) authority to enforce securities law through its in-house tribunal system, ⁣rather than in court.​ This case,‌ known as Jarkesy v. SEC, is one of ‍three significant cases this ⁤term that‌ could‌ have a profound impact ‍on ‍the administrative state.

The​ arguments ⁣in Jarkesy v. SEC come at a time when⁢ the Republican-appointed majority on the high court ⁣has chosen several cases that have ​the potential to disrupt federal agency⁢ authority under ‍President Joe Biden and future​ administrations. The ⁢case revolves around hedge fund manager and ‍conservative radio host‌ George Jarkesy, who was fined and barred⁣ from the industry by the SEC ⁤for securities fraud.

Controversy Surrounding ⁣the SEC’s In-House System

The⁣ U.S. 5th Circuit Court⁢ of Appeals ruled in ​favor of Jarkesy, stating ⁤that the SEC’s ability to impose penalties through in-house enforcement​ proceedings violated the ​Constitution’s ‍Seventh‌ Amendment ‍right to a jury trial and encroached on presidential and congressional powers.​ The Biden administration has ‍appealed the ruling, emphasizing its exceptional importance.

Critics argue that the SEC’s in-house system, which relies on SEC-appointed administrative​ law judges (ALJs), unfairly favors the prosecution and denies defendants the opportunity for a fair trial before an impartial jury in federal ​court. Jarkesy’s attorneys‌ claim that the entire system is rigged against defendants, citing the agency’s consistent track record of ⁢ruling in its own favor.

Proponents of the ⁢in-house system ⁢argue that it expedites proceedings and‍ allows the SEC⁣ to protect investors more efficiently.‍ A study ⁤conducted by the ⁢University of British Columbia found⁤ that claims‌ brought in-house ⁢are 27 ⁢times faster than those brought‌ in federal court.

Potential Implications ⁣for Other Regulatory Agencies

If the​ Supreme Court deems ALJs unconstitutional, it could‌ have far-reaching consequences ‌for other regulatory agencies, such as the⁤ Federal Deposit Insurance​ Corporation, Federal Reserve System, Office of the Comptroller ‌of‌ the⁣ Currency, ‍and the National Credit Union Administration.​ These agencies also rely on in-house judges⁣ to ‌adjudicate claims and lack the option to bring​ enforcement actions in federal⁤ court.

The SEC, responsible for enforcing laws that⁤ protect shareholders, has ⁣faced setbacks at the Supreme Court in ​recent‌ years. ‍The⁤ court ruled in 2018 that the ‌SEC erred in⁣ appointing in-house judges and⁤ granted targets of agency actions ​a ‌better chance to take their cases to ​federal court.

Three Major Administrative‌ Law Challenges

Jarkesy v. ‌SEC is one of three major administrative law challenges the Supreme Court will ‌hear this year.‍ Another⁢ case‌ involves the‍ Consumer ⁤Financial Protection Bureau’s funding mechanism, while the ‌third challenges the⁣ long-standing precedent known as the ‌Chevron deference.

All three cases have the⁢ potential to ⁣significantly diminish the⁣ powers of government agencies under the executive branch. However, it remains to be seen whether the court will rule in favor of the challengers or maintain long-standing precedent.

For now, the⁢ Supreme Court will ⁣determine whether ​Jarkesy can succeed in his Seventh Amendment claim against the SEC, potentially forcing the agency to send more ‍enforcement cases to federal court. Additionally, Jarkesy’s⁢ nondelegation claim, which questions Congress’s ability‍ to grant agencies unchecked power, ‍could further jeopardize the future of agency tribunals.

A decision ⁤in Jarkesy v. ⁢SEC is expected by the end of June next⁢ year.

How does the case reflect the ongoing political battle between Republicans and Democrats over the authority of federal ⁤agencies and the ⁣administrative state

⁢ >istol found that ‌the SEC’s in-house process resolved cases 70% faster than the federal court system. Additionally, they argue that the ALJs are experts ⁣in securities law and can⁤ provide more nuanced decisions compared to juries with ‍limited knowledge of the subject ​matter.

The Supreme Court’s​ Potential Impact

If the Supreme⁤ Court‌ upholds the 5th Circuit’s ruling, it‌ would significantly limit the SEC’s ‍ability⁣ to enforce​ securities law and potentially⁤ disrupt the ‌administrative state. The⁢ SEC relies on its in-house‌ tribunal system⁤ to efficiently⁤ handle and adjudicate a large volume of cases.‍ Without this system,⁣ the ‍agency may‌ struggle to effectively regulate the securities industry and⁢ protect⁤ investors.

Moreover, a⁤ ruling against the ‌SEC⁣ could lead to other federal agencies facing ​legal challenges to their in-house systems, undermining the power and ⁢autonomy of⁢ these agencies. It could also give defendants in other regulatory‌ cases​ the opportunity to challenge‍ the constitutionality of administrative law judges and seek alternative avenues for resolving disputes.

Political ⁣Implications

The case has⁤ political implications,​ as⁤ it highlights the ongoing battle between Republicans and⁣ Democrats ⁢over the scope of federal agency powers. The Republican-appointed majority on the⁣ Supreme Court has shown a willingness to rein in the⁢ authority⁣ of federal agencies, often seen as‌ acting​ beyond their congressionally delegated powers.

On‍ the other hand, ‌the Biden administration’s decision to appeal the ruling demonstrates its‍ commitment to defending and ⁤strengthening the administrative state. ⁤It argues that the⁣ SEC’s in-house system is a ​critical tool in effectively enforcing securities law and safeguarding ‌the financial ⁣system.

As the case unfolds, it will be closely ⁤watched ⁢by legal experts, ‍scholars, and the​ financial industry. ‌The Supreme Court’s decision will have far-reaching⁣ implications for ⁣the SEC’s enforcement powers and⁢ the future of administrative law in⁣ the United States.

Conclusion

The Supreme Court’s consideration of the SEC’s authority to enforce securities ⁣law through its in-house tribunal system⁣ is a major case that has the potential ​to reshape the administrative state. The controversy surrounding the SEC’s in-house system raises important constitutional and procedural questions about ‌the rights of defendants and ‍the efficiency of ⁢the regulatory process.

While critics argue that the in-house system is‍ biased and denies defendants a fair trial, proponents emphasize⁢ its efficiency and expertise in handling complex securities cases. ⁢The Supreme Court’s ruling in Jarkesy v. SEC will have significant implications for the​ SEC’s ability to ⁣regulate the ​securities industry ⁢and may ‍impact‌ other federal agencies’ in-house enforcement systems.

Ultimately, this case highlights the ongoing political and legal debate over the scope of federal agency powers and ‌the balance ​between administrative efficiency and individual rights. The ​Supreme Court’s⁤ decision will shape the future of the‍ administrative state and have implications for the broader landscape of⁤ regulatory enforcement in the United States.