The rise in the U.S. Securities and Exchange Commission’s use of its administrative law judges (ALJs) to adjudicate enforcement actions has led to another rise: the rise in challenges to the constitutionality of the appointment of SEC ALJs. Adding to an already thorny circuit split, judges in the Northern District of Georgia and Southern District of New York recently ruled that the SEC’s policy of using ALJs to try civil enforcement actions in-house is likely unconstitutional. These decisions controvert those of other district courts, as well as the SEC commissioners’ own decision declaring the agency’s use of ALJs constitutional.
This article will explore these conflicting decisions and related SEC administrative and legislative proposals to address the growing number of Appointments Clause challenges. It will also suggest best practices for respondents in SEC enforcement actions for the timing and venue for injunctive relief motions in district court.
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