Constitutional Scrutiny of the SEC's Forum Selection

The Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the menu of remedies available to the Securities and Exchange Commission (SEC) in cease-and-desist proceedings to include the imposition of civil penalties which replicate those previously available only in actions commenced in federal district court. As a consequence, there is a near parallel between the remedies available to the SEC in federal actions and cease-and-desist proceedings against all violators of the anti-fraud provisions of the federal securities laws.

With near equal availability of remedies and the absence of key substantive and procedural safeguards that would be available to a defendant in federal district court, a shift of SEC enforcement efforts to its administrative tribunal would be expected. However, when the SEC brought administrative and cease-and-desist proceedings against Rajat K. Gupta despite having previously filed related complaints against 28 individuals and entities in federal court, Mr. Gupta sued the SEC. Gupta v. Sec. & Exch. Comm., 2011 WL 2674840 (S.D.N.Y. July 11, 2011).