SEC Use of In-House Judge Violates Defendant Rights, Appeals Court Says – The New York Times

A divided federal appeals court panel on Wednesday threw a wrinkle into how the Securities and Exchange Commission prosecutes some enforcement actions by declaring that its administrative proceedings can violate a defendant s constitutional rights.

The U.S. Court of Appeals for the Fifth Circuit, in a 2-1 decision, ruled that the S.E.C. violated a hedge fund manager s Seventh Amendment right to a jury trial when it let an in-house judge decide a civil fraud case. Such administrative proceedings are common among regulatory agencies, which use them to decide some enforcement actions.

The ruling from the Fifth Circuit one of the nation s most conservative federal appellate courts is another legal challenge to the S.E.C. s growing reliance on administrative law judges, rather than the filing of civil complaints in federal court. But for the moment, the ruling s impact is limited to federal courts in the court s jurisdiction, which covers Texas, Louisiana and Mississippi.

via www.nytimes.com

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