The Supreme Court on Thursday stripped the Securities and Exchange Commission of a key tool in fighting securities fraud, in a decision that could have far-reaching implications for other regulators.
The judges handed down their ruling In a 6-3 vote, the court ruled that people accused of fraud by the Securities and Exchange Commission, which regulates the securities markets, have the right to a jury trial in federal court. The court said the internal procedures the SEC used in some civil fraud prosecutions violated the Constitution.
The SEC announced in a news release that it has assessed more than $5 billion in civil penalties in government expenditures for fiscal year 2023, which ends Sept. 30.
It’s unclear how much of that money came from internal processes or through litigation in federal court.
The agency has already reduced the number of cases it takes to administrative litigation pending a ruling from the Supreme Court.
This incident This season, several Conservatives and business groups have urged the nine-judge Supreme Court to curtail the power of federal regulators.
They are already being held back by the Supreme Court’s six conservatives, including Last year’s decision This has severely limited the ability of environmental regulators to monitor water pollution in wetlands.
The Supreme Court rejected arguments by President Biden’s administration that the internal procedures did not violate people’s constitutional right to a jury trial in civil cases, based on a 50-year-old ruling.
The Supreme Court ruled in the case of Houston hedge fund manager George R. Jarkessy.
The SEC appealed to the Supreme Court after a divided opinion from the New Orleans-based 5th Circuit Court of Appeals. imposed heavy fines against Mr. Jarkesy and his investment adviser, Patriot 28.
The appeals court ruled that the SEC’s lawsuit against Jarkesy, which resulted in a $300,000 civil penalty and the restitution of $680,000 in allegedly fraudulently obtained funds, should have been heard in federal court rather than before an SEC administrative law judge.
Jarkesy’s lawyers noted that while the SEC wins most of the cases it brings before administrative law judges, it only wins about 60 percent of the cases heard in federal court.
The appeals court also said Congress unconstitutionally gave the SEC “unlimited power” to decide whether the case should be heard in court or handled within the administrative agency.
He also said the law protecting the commission’s administrative law judges from being fired by the president was unconstitutional.
These issues are November discussionAnd the court chose to resolve the case solely based on the right to a jury trial.
