US Supreme court rules SEC administrative law judges are subject to the appointments clause

Abstract

Purpose

The purpose of this paper is to analyze the Supreme Court’s decision in Lucia v. Securities and Exchange Commission, 138 S.Ct. 2044 (June 21, 2018).

Design/methodology/approach

The approach of this paper is to discuss the Securities and Exchange Commission’s (“SEC”) use of Administrative Law Judges (“ALJs”), and the litigation challenging the appointment of those ALJs, culminating in the Supreme Court’s decision in Lucia.

Findings

In Lucia, the Court held that SEC ALJs are “officers of the United States,” and thus subject to the Constitution’s Appointments Clause, which limits the power to appoint “officers” to the President, “Courts of Law” or “Heads of Departments.” Because the ALJ who presided over Lucia’s administrative proceeding was not appointed by the SEC itself, the Court held that the ALJ’s appointment was unconstitutional and ordered the SEC to provide Lucia with a new hearing in front of a new (constitutionally appointed) ALJ.

Practical implications

The Supreme Court’s decision in Lucia provides defense counsel with new ammunition to challenge SEC administrative proceedings. It will likely have a significant effect on many pending and already-concluded SEC administrative proceedings but also leaves open a number of important questions for further litigation.

Originality/value

This paper provides expert analysis and guidance from experienced securities litigators.

Citation

Roth, J.D. and Santolli, J.J. (2019), "US Supreme court rules SEC administrative law judges are subject to the appointments clause", Journal of Investment Compliance, Vol. 20 No. 1, pp. 22-26. https://doi.org/10.1108/JOIC-01-2019-0003