As we discussed in our April 2016 column,1 one major feature of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was that it expanded the SEC’s jurisdiction and authorized the agency to impose civil money penalties in administrative proceedings against anyone who violated the federal securities laws.2 Before Dodd-Frank, the SEC could bring such proceedings only against a regulated entity or an individual associated with one. In our previous column, we examined some of the constitutional and other challenges brought against this administrative scheme. Here, we review a raft of changes to the way those administrative proceedings are conducted.
The SEC enjoys many procedural advantages when pursuing actions before its own administrative law judges (ALJs)—limited discovery disclosures, liberal evidentiary rules, no jury, and an internal appeals process. In recent years, the defense bar has complained increasingly that the SEC’s administrative proceedings do not offer adequate discovery and that respondents are rushed to trial without sufficient time to prepare a meaningful defense. These significant disadvantages for respondents, combined with reports suggesting the SEC enjoys a higher win rate in administrative hearings than in federal court, support the widespread view that the SEC has a “home field advantage” before its own tribunals.
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