The Securities and Exchange Commission’s (SEC) selective use of administrative proceedings (AP) for some, but not all, litigated enforcement actions has been the subject of significant public criticism in recent years. Respondents have brought numerous challenges to the SEC’s use of APs arguing that the SEC’s selective use of the proceedings is inherently unfair. Respondents achieved a measure of success in 2015 by challenging APs on the ground that administrative law judges (ALJs) were not properly appointed pursuant to the Appointments Clause of Article II of the Constitution and, thus, could not issue decisions in APs.1
On Aug. 9, 2016, however, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit issued Lucia v. SEC,2 which roundly rejected the respondent’s challenge and held the SEC’s use of ALJs constitutional. As the first appellate decision to address the constitutionality of the SEC’s appointment of ALJs, the D.C. Circuit’s opinion could embolden the commission to continue its use of APs in litigated enforcement actions.
Petitions for Injunctions
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