The U.S. Supreme Court held that the Seventh Amendment to the U.S. Constitution entitles a defendant to a jury trial when the Securities and Exchange Commission seeks to impose civil penalties for violations of the federal securities laws. The decision in SEC v. Jarkesy means that the SEC must file enforcement actions in federal court, rather than before an administrative law judge, when it seeks civil penalties for alleged securities fraud.
seventh amendment
Fifth Circuit Holds SEC’s In-House Courts and Judges Unconstitutional
By Joshua M. Newville & Julia Alonzo on
In Jarkesy v. Securities and Exchange Commission, the Court of Appeals for the Fifth Circuit issued a remarkable opinion holding numerous aspects of the SEC’s administrative enforcement regime are unconstitutional. The May 18, 2022 ruling stands to eliminate the SEC’s ability to adjudicate enforcement actions seeking penalties using ALJs, rather than bringing suit in federal district court. It also could tee up further argument at the Supreme Court to resolve the scope of the SEC’s – and, perhaps, other administrative bodies’ – adjudicatory powers.