Only after an in-agency appeal can a defendant escape this regulatory Bermuda Triangle and seek redress in a federal appeals court. As noted in the Cato brief, 'From 2010 to 2015, the Commissioners decided 95% of appeals in the agency's favor, sometimes overruling ALJ decisions that were more favorable to the respondent only to impose harsher sanctions.' Conversely, the agency had won only 61 percent of cases brought in Article III courts.ĭefendants may appeal ALJ rulings to SEC commissioners-but with similarly predictable results. As of 2014, when Jarkesy's administrative trial began, ALJs had never ruled against the SEC. Moreover, Cato's brief relates, 'he close relationship between SEC enforcement staff and the in-house adjudicators has led to breaches of confidential information,' affecting 'dozens of cases, including Jarkesy's.'Įffectively, this system makes agency staff not just judge, jury, and executioner, but prosecutor and appellate body as well. Effectively, 'the prosecutors act as counsel to the very people who will be adjudicating their case,' as the Cato Institute writes in an amicus brief. Agency enforcement officials work closely with commissioners, who review ALJ decisions. Administrative trials guarantee the accused fewer safeguards, including scant discovery opportunities and unfriendly evidentiary rules. The SEC chooses its preferred forum to pursue cases largely at its own convenience. Should the Supreme Court do likewise, countless Americans would regain access to a foundational constitutional protection.ĪLJs often substitute for federal district courts to adjudicate agency enforcement actions, creating myriad due process violations. Court of Appeals for the 5th Circuit ruled for Jarkesy in 2022. George Jarkesy, whom the SEC accuses of securities fraud, argues that the ALJ system violates the Seventh Amendment, which guarantees the right to a jury trial.

Since many federal agencies-including the Federal Trade Commission (FTC), the Environmental Protection Agency, and the Postal Service-utilize ALJs, the case's outcome will reverberate across the administrative state.

Jarkesy, the justices will determine the constitutionality of the agency's system of in-house administrative law judges (ALJs), bureaucrats who often act as judge and jury in the agency's enforcement actions.

In Securities and Exchange Commission ' s (SEC) v. The Supreme Court on Wednesday will hear arguments in a case that hinges on whether, as a legal matter, Congress can blend powers the Framers of the Constitution carefully kept separated.

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