Rep. Scott Garrett (R-N.J.) recently introduced legislation that would let defendants choose the option of having their case tried in federal court instead of by a Securities and Exchange Commission administrative law judge. Garrett believes that the regulator has been overusing its in-house courts, practically turning itself into “judge, jury, and executioner” in enforcement cases.
Garrett, along with others who oppose the use of SEC in-house judges, says that defendants have greater latitude when their cases go to a jury. His bill would also up the evidence standards for cases that are presided over by an SEC judge.
Several parties have filed lawsuits opposing the SEC’s administrative court process. They claim that the system is a constitutional violation. Some feel that the SEC has the upper hand when it comes to the outcome of enforcement cases because its own judges are deciding the rulings.
In June, U.S. District Judge Leigh Martin May said that the SEC likely overstepped its constitutional authority when it appointed an in-house judge in an insider trading case against a real estate developer. Charles Hill is accused of making money from trades he made after a friend gave him a tip. May said that under the U.S. Constitution, the judiciary, the president, or the department head are the only ones who can appoint judges. At the SEC, nonjudicial officers are allowed to appoint its in-house judges.
It was in September that the SEC issued its proposal to make the rules governing its use of in-house judge in enforcement cases less stringent. The proposal would grant more time before an administrative proceeding has to take place, allow for witness deposement, mandate that each party turn in their filings and serve the other side electronically, and make the appeal process more transparent and simpler.
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Republican introduces bill to curb SEC use of in-house judges, Investment News, October 22, 2015