SCOTUS Decision Upends In-House Tribunals in SEC Fraud Cases

SCOTUS Decision Upends In-House Tribunals in SEC Fraud Cases

June 19, 2024, Compliance Week

David Fredrickson’s commentary was included in a Compliance Week article exploring how the Supreme Court’s Jarkesy ruling affects how the Securities and Exchange Commission (SEC) will adjudicate securities fraud cases. As a result of the ruling, the agency’s practice of using in-house tribunals overseen by an administrative judge to preside over securities fraud cases was deemed unconstitutional.

David provides his insight on how this will affect the SEC’s oversight power. He points out that as a practical matter, the SEC had largely moved away from using administrative proceedings in securities fraud cases since the Fifth Circuit’s ruling in the case. “Because of the uncertainty, it has been bringing fraud actions for penalties in district court where it’s long recognized the right to a jury trial,” he said.