The defense bar recently won a significant victory in the battle to challenge the SEC’s expanded use of administrative proceedings, following the 2010 enactment of the Dodd-Frank Act, to seek penalties against unregulated individuals and entities. As we previously wrote in SEC’s Administrative Proceedings: Where One Stands Appears to Depend on Where One Sits and There’s No Place Like Home: The Constitutionality of the SEC’s In-House Courts, SEC administrative proceedings have recently faced growing scrutiny, including skepticism about whether the administrative law judges (ALJs) presiding over these cases are inherently biased in favor of the SEC’s Division of Enforcement. The Wall Street Journal recently reported that ALJs rule in favor of the SEC 90% of the time in administrative proceedings. Administrative proceedings have also been criticized for the ways in which they differ from federal court actions, including that respondents are generally barred from taking depositions, counterclaims are not permissible, there is no equivalent of Rule 12(b) motions to test the allegations’ sufficiency, and there is no right to a jury trial.
District Judge Takes Jab at SEC’s Home-Court Advantage in Administrative Proceedings, But Defense Bar May Not Have a Slam Dunk
