SEC Puts Administrative Proceedings within Tenth Circuit on Hold After Court Rules Them Unconstitutional


Posted on May 25, 2017, by Mary P. Hansen and Jennifer B. Dempsey in Administrative Proceedings. Comments Off on SEC Puts Administrative Proceedings within Tenth Circuit on Hold After Court Rules Them Unconstitutional

The SEC announced this week that it would stay all administrative proceedings involving certain provisions of the Securities Act, the Securities Exchange Act, and the Investment Company Act in the wake of the Tenth Circuit’s decision in Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016).

In Bandimere, the Tenth Circuit held that the SEC’s administrative law judges (“ALJs”) were “inferior officers” who are subject to the Appointments Clause of the U.S. Constitution. The appeals court granted the petition for review on constitutional grounds because the ALJ was not constitutionally appointed and his duties involved the exercise of significant authority. The court denied the petition for rehearing en banc on May 3, 2017.

The SEC explained that “[i]n light of the U.S. Court of Appeals for the Tenth Circuit’s recent decision denying rehearing en banc in Bandimere v. SEC, we find it prudent to stay all administrative proceedings assigned to an administrative law judge in which a respondent has the option to seek review in the Tenth Circuit of a final order of the Commission.”

As we previously reported, the constitutionality of the SEC’s use of ALJs has been the subject of divergent court decisions, with the D.C. Circuit upholding their use in an August decision. The D.C. Circuit, however, subsequently vacated that decision in February and held oral argument on rehearing en banc on May 24.

 





Comments are closed.



From the Blog:

SEC Awards More Than $4.1 Million to Whistleblower Despite a Finding that Whistleblower Unreasonably Delayed Reporting Misconduct

The SEC announced earlier today that it has awarded more than $4.1 million to a former company employee who “alerted the agency to a...

Ex-Executives Move to Compel Law Firm to Produce Notes from Internal Investigation

On October 31, 2017, two former executives from General Cable Corporation (“GCC”) filed a motion to compel Morgan Lewis & Bockius LLP (“Morgan Lewis”)...