U.S. District Judge Jed Rakoff delivered a speech at the Practising Law Institute in November with a characteristically provocative title: “Is the SEC Becoming a Law Unto Itself?” The influential New York judge noted that the U.S. Securities and Exchange Commission is bringing ever more cases internally, before its own administrative law judges, rather than in the federal courts. He urged the SEC to consider whether the trend was undercutting the courts’ role and was unfair to defendants, who lost 100 percent of the agency’s administrative trials over the last fiscal year.
As the SEC doubles down on its use of administrative proceedings, a federal appeals court is now poised to consider Rakoff’s question for the first time. The U.S. Court of Appeals for the D.C. Circuit has agreed to hear a case brought by hedge fund manager George Jarkesy Jr., who claims that the SEC violated his due process rights when it brought an administrative action against him in 2013. The court’s decision could help resolve a series of challenges related to the SEC’s internal enforcement regime, which, as Rakoff noted, has produced win after win for the agency.
