Securities and Exchange Commission v. Jarkesy
Issues
Does the Securities and Exchange Commission’s choice of enforcement proceedings violate the Seventh Amendment or nondelegation doctrine, and does the for-cause removal of Administrative Law Judges violate Article II of the United States Constitution?
This case asks the Supreme Court to decide whether the Securities and Exchange Commission’s (“SEC”) power to adjudicate securities fraud claims violates the Seventh Amendment or nondelegation doctrine, and if the for-cause removal protections for Administrative Law Judges violate the Take Care Clause. The SEC argues that securities fraud actions only implicate public rights that do not require juries, that its power to choose between adjudicatory and court-based enforcement was created lawfully by Congress, and that the for-cause removal protections do not unduly interfere with the President’s power. Jarkesy counters that securities fraud claims are private rights that require juries, that the SEC’s choice of where to adjudicate enforcement actions unduly delegated legislative power, and that the for-cause protections interfere with Presidents’ ability to carry out their duties. The outcome of this case has serious implications for securities regulation, the workability of administrative enforcement actions, and public faith in federal adjudicatory institutions.
Questions as Framed for the Court by the Parties
- Whether statutory provisions that empower the Securities and Exchange Commission to initiate and adjudicate administrative enforcement proceedings seeking civil penalties violate the Seventh Amendment.
- Whether statutory provisions that authorize the SEC to choose to enforce securities laws through an agency adjudication instead of filing a district court action violate the nondelegation doctrine.
- Whether Congress violated Article II by granting for-cause removal protection to administrative law judges in agencies whose heads enjoy for-cause removal protection.
In 1934, Congress passed the Securities and Exchange Act of 1934 (“the Act”) creating the Securities and Exchange Commission (“SEC”). 15 U.S.C. 78d(a). Its primary purpose was to protect investors and ensure a fair and efficient market. Id. The SEC is comprised of five commissioners who are appointed by the President with the advice and consent of the Senate. Id.
Additional Resources
- Bill Flook, Beyond Jarkesy, SEC Administrative Proceedings Face Attacks on Multiple Fronts, Thomson Reuters (June 17, 2022).
- Andy Kriha, Susan G. Lafferty & Alexander S. Holtan, U.S. Supreme Court Agrees to Hear Nondelegation Case, Holland & Knight (July 5, 2023).
- Gillain A. Reid, Jay A. Dubow, Mary Weeks & Dominyka Plukaite, Supreme Court Review May Prove the Death Knell to SEC Administrative Courts, Troutman Pepper (July 5. 2023).
- Robert Stebbins, Abigail Edwards & Ariel Blask, The Jaresky Decision and Ramifications for Administrative Proceedings, Harvard Law School Forum on Corporate Governance (June 29, 2022).