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Bailey McCann, Opalesque New York:

The United States Supreme Court has dealt a fresh blow to the SEC in its latest ruling. In Securities and Exchange Commission v. Jarkesy, George Jarkesy a former hedge fund manager argued that the way the SEC uses its administrative law judges is unconstitutional. The SEC previously determined whether or not its administrative actions would be handled in-house by an administrative judge or taken through the federal court system. The Supreme Court agreed with Jarkesy in a divided opinion which will require the SEC to bring some fraud complaints in federal court going forward.

The case stems from a 2011 administrative action brought against Jarkesy for securities fraud. Jarkesy appealed to the US Court of Appeals for the Fifth Circuit, which found multiple violations of the constitution. The Supreme Court affirmed those violations 6-3.

"A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator," Chief Justice John Roberts wrote for the court's conservative majority.

The case raises new questions about the viability of the SEC's administrative law judges. The opinion seems to suggest that individuals who have registered with the SEC as a function of their job could still go through the administrative law court. Mr. Jarkesy was not registered. The appeals court threw out the fines levied against Mr. Jarkesy by the SEC in its administrative proceeding.......................

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