Supreme Court will decide whether SEC enforcement actions violate right to jury trial
The U.S. Supreme Court has agreed to decide whether some administrative trials by the U.S. Securities and Exchange Commission violate the Seventh Amendment’s right to a jury.
The U.S. Supreme Court has agreed to decide whether some administrative trials by the U.S. Securities and Exchange Commission violate the Seventh Amendment’s right to a jury.
The Supreme Court agreed to hear the case June 30, report Reuters, Bloomberg Law and a press release by the Institute for Justice, a nonprofit public-interest law firm.
The 5th U.S. Circuit Court of Appeals at New Orleans had ruled in May 2022 that SEC administrative trials violated the right to a jury trial when civil penalties are sought.
The appeals court also held that Congress unconstitutionally delegated legislative power to the SEC by giving it the authority to decide whether to bring cases in court or within the agency. And the 5th Circuit said the agency’s administrative law judges were appointed in violation of the take care clause because of statutory restrictions on their removal.
All three of those issues are now before the Supreme Court, according to the SCOTUSblog case page.
According to Reuters, a decision against the SEC could “broadly undercut the power of federal agencies.”
Bloomberg Law reports that the case “adds to a 2023-24 term that was already set to have broad implications for federal regulators. The justices are also planning to consider whether the Consumer Financial Protection Bureau’s funding system is constitutional and whether to overturn a precedent that gives agencies leeway when they interpret ambiguous congressional commands.”
The Institute for Justice said in the press release it has filed a similar case challenging the U.S. Department of Labor’s in-house agency courts.
“The Constitution guarantees the right to trial by jury, not trial by bureaucrat,” said Rob Johnson, a senior attorney for the Institute for Justice, in the press release.
The case involves a civil penalty of $300,000 against hedge fund creator George R. Jarkesy Jr. and his investment adviser, Patriot28. They were accused of misrepresenting fund safeguards and overvaluing the funds’ assets to increase fees charged to investors. Patriot28 was also ordered to disgorge nearly $685,000 in ill-gotten gains.
The case is Securities and Exchange Commission v. Jarkesy.
