Supreme Court rejects how SEC attacks securities fraud

Washington • The Supreme Court on Thursday rejected one of the primary ways the Securities and Exchange Commission enforces laws against securities fraud.

The agency, like other regulators, brings some enforcement actions in internal tribunals rather than in federal courts. The SEC’s practice, Chief Justice John Roberts wrote for a six-justice majority in a decision divided along ideological lines, violated the right to a jury trial.

“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” the chief justice wrote.

The case is one of several challenges this term to the power of administrative agencies, long a target of the conservative legal movement. The court last month rejected a challenge to the constitutionality of the way the Consumer Financial Protection Bureau is funded. In January, it heard arguments in a pair of challenges to the Chevron doctrine, a foundational principle of administrative law that requires judicial deference to agencies’ reasonable interpretations of ambiguous statutes. (That case has not been decided.)

A central question in the new case, Securities and Exchange Commission v. Jarkesy, No. 22-859, was whether the administrative tribunals violate the right to a jury trial guaranteed by the Seventh Amendment in “suits at common law.”

Lawyers for the agency said juries were not required in administrative proceedings because they were not private lawsuits but part of an effort to protect the rights of the public generally. They added that agency adjudications without juries are commonplace, with two dozen agencies having the authority to impose penalties in administrative proceedings.

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Supreme Court rejects how SEC attacks securities fraud

Supreme Court rejects how SEC attacks securities fraud

Supreme Court rejects how SEC attacks securities fraud

Supreme Court rejects how SEC attacks securities fraud

Supreme Court rejects how SEC attacks securities fraud