Late last month the Supreme Court of the United States issued a highly anticipated ruling in a case that could have lasting ramifications for investors and financial institutions. In the case of Lucia v. SEC, the court ruled that the Securities and Exchange Commission’s (SEC) appointments of Administrative Law Judges were unconstitutional.
The Supreme Court ruled that SEC administrative law judges are “officers of the United States” and therefore subject to the Constitution’s appointments clause (Source: “Lucia v. Securities and Exchange Commission”, SCOTUSblog).
The 7-2 decision reaffirms the notion that those administrative law judge positions must be filled via appointment by the president, courts of law, or heads of departments. Prior to the litigation that led to the decision, the SEC had delegated the hiring of administrative law judges to its staff. As a result of the decision, the SEC must revisit decisions made by the Administrative Law Judges during the period after their unconstitutional appointments (Source: “SEC Suspends Pending Administrative Proceedings in Wake of Lucia Decision”, Lexology).
This decision is great news for any individual or entity who was subjected to an unfavorable ruling by an administrative law judge in 2017. Those decisions will now be reviewed by a properly appointed Administrative Law Judge or the SEC itself. Additionally, the SEC has ordered a temporary stay on all pending administrative proceedings, providing additional time for those with upcoming proceedings to prepare their strategy.
No matter the subject, if you have administrative business before the SEC, it is crucial to have a law firm on your side with experience practicing before the SEC’s Administrative Law Judges. This case rising all the way to the Supreme Court highlights just how important these matters can be.