In a ruling that could potentially upend U.S. Securities and Exchange Commission enforcement proceedings going forward, a federal appeals court ruled May 18 that the SEC’s in-house adjudication process is unconstitutional.

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit said in a 2-1 opinion in Jarkesy v. SEC that the agency’s use of administrative law judges violates defendants’ Seventh Amendment right to a jury trial, that Congress unconstitutionally delegated legislative power to the SEC in giving it ”unfettered authority to choose whether to bring enforcement actions in Article III courts or within the agency,” and that statutory restrictions on the president’s ability to remove SEC ALJs violates the Take Care Clause of Article II.

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