Supreme Court to Review SEC’s Administrative Court Power

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By Carina

The U.S. Supreme Court is poised to deliberate on a case that could significantly impact the power of administrative courts within the Securities and Exchange Commission (SEC).

The issue, SEC v. Jarkesy, centers around hedge fund manager George Jarkesy, who was fined by the SEC for securities fraud.

Mr. Jarkesy appealed against the SEC’s decision in the U.S. Court of Appeals for the Fifth Circuit, which ruled that the SEC’s administrative proceedings were unconstitutional.

Core Constitutional Issues at Stake

The Fifth Circuit’s decision highlighted several constitutional concerns. First, it questioned denying a jury trial, potentially violating the Seventh Amendment.

It also critiqued the Congress’s delegation of power to the executive branch. It challenged the protection offered to administrative law judges, arguing it interfered with the President’s constitutional duty to ensure laws are faithfully executed.

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Implications of the Supreme Court’s Decision

The Supreme Court’s review of this case could redefine the boundaries of administrative authority. A decision upholding the Fifth Circuit’s ruling may render adjudications by federal agencies, not just the SEC, impractical.

This could lead to a shift of complex litigation to federal courts, potentially overwhelming them without additional resources.

Historical Context and Public Reaction

The case has drawn public attention, including from prominent figures like Elon Musk and Mark Cuban.

It revives historical concerns about the rise of the administrative state, likened to British admiralty courts that imposed penalties without juries, a grievance highlighted in the Declaration of Independence.

The Wall Street Journal editorialized on the historical parallels and the need for judicial oversight of administrative tribunals.

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The Broader Legal Landscape

The Supreme Court’s decision in SEC v. Jarkesy will come amid other significant cases this term that reevaluate administrative power, including challenges to the Chevron deference doctrine.

The outcome of these cases will clarify the balance of powers among Congress, the executive branch, and the judiciary and define the limits of administrative authority in federal governance.

The Future of Administrative Courts

The outcome of SEC v. Jarkesy could have far-reaching consequences for the structure and function of administrative courts within federal agencies.

It could redefine how these agencies enforce regulations and adjudicate disputes, aligning them more closely with constitutional principles and ensuring greater accountability and checks and balances within the federal government.

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