For now, the U.S. Supreme Court’s decision in SEC v. Jarkesy applies only to SEC statutory fraud claims. But the court’s reasoning has the potential to be extended to proceedings before other federal agencies, and the court this term has expressed willingness to revisit principles of administrative law. A group from Sidley Austin takes a closer look at the case and its potential ripple effects.
The U.S. Supreme Court’s recent decision in SEC v. Jarkesy may create compliance opportunities and challenges for companies in highly regulated industries facing administrative enforcement proceedings. Media reports that Jarkesy has ended federal administrative enforcement are overblown.
Contrary to these reports, the court held that the SEC could no longer file civil penalty actions for alleged fraud actions before its own administrative law judges (ALJs) but instead must file such actions in federal court. Such penalty actions, in the court’s view, are the types of suits that create a right to a jury trial under the Seventh Amendment of the U.S. Constitution.
As a result, Jarkesy creates an opening to push back against federal agencies that heavily lean on ALJs for civil enforcement. On the other hand, administrative actions involving ALJs often provide companies the most efficient and least costly…
