May 19, 2022

More SEC ALJ Drama: Fifth Circuit Rules Use of SEC ALJs Unconstitutional

Earlier this week, I blogged about the Supreme Court granting cert to review whether the SEC’s Administrative Law Judges are unconstitutionally protected from removal. Now comes word that on Wednesday a three judge panel of the U.S. Court of Appeals for the 5th Circuit, in a 2-1 decision, ruled that the SEC’s ALJ system violated a person’s right to a jury trial in federal court and relied on unconstitutionally delegated legislative power. The opinion also said that statutory restrictions on the removal of the SEC’s ALJs are also unconstitutional.

As this Bloomberg article notes, the decision stems from an action that the SEC first brought in 2013 against a hedge fund manager and his fund.

– Dave Lynn