Supreme Court Limits Ability Of SEC To Issue Fines
In a Thursdayruling, the Supreme Court placed new restrictions on the ability of the Securities and Exchange Commission to charge a person or company with a violation and adjudicate it outside of federal court.
The decision in SEC v. Jarkesy is the latest in a string of cases where the court has pared back the power of federal agencies. Limiting the ability of agencies to issue regulations ― and, now, to prosecute certain legal offenses ― is a hallmark of the court’s nearly four-year-old conservative supermajority.
The ruling has implications for other agencies that, like the SEC, hold in-house tribunals and issue civil penalties for breaking the law.
Make no mistake: Today’s decision is a power grab... The majority oversteps its role and encroaches on Congress’s constitutional authority.Justice Sonia Sotomayor in her dissent
This case came about after the SEC charged conservative radio host George Jarkesy Jr. with securities fraud for alleged improper reporting regarding two investment funds that he ran. An internal SEC adjudication process found him guilty and imposed a fine of $300,000 in 2013.
In response, Jarkesy sued, claiming that the agency’s ability to both charge him and conduct an administrative judicial proceeding violated his Seventh Amendment right to a trial by jury. He was backed by several business and conservative groups eager to pare back the regulatory power of federal agencies.
In a 6-3 decision written by Chief Justice John Roberts, the court ruled that when the agency sought civil penalties for alleged fraud, the defendant was entitled to a jury trial ― though it set aside other constitutional questions raised by Jarkesy’s case.
“The SEC’s antifraud provisions replicate common law fraud, and it is well established that common law claims must be heard by a jury,” Roberts wrote.
In a dissent penned by Justice Sonia Sotomayor, the liberal justices said the ruling against the SEC was yet another instance of the conservative wing “arrogating” policymaking power away from Congress and toward the judiciary. They accused the majority of a “repeated failure to appreciate that its decisions can threaten the separation of powers.”
“Make no mistake: Today’s decision is a power grab,” Sotomayor wrote. “The majority oversteps its role and encroaches on Congress’s constitutional authority. Its decision offends the Framers’ constitutional design so critical to the preservation of individual liberty: the division of our Government into three coordinate branches to avoid the concentration of power in the same hands.”
It has long been a goal of the conservative legal movement to weaken the powers of the so-called “administrative state,” making it harder to regulate matters like finance, labor and the environment. The court’s right wing has provided a receptive audience, issuing rulings against federal bodies like the Environmental Protection Agency, the Occupational Safety and Health Administration and the National Labor Relations Board in recent years.
On Thursday, the court issued a separate ruling that dealt another blow to the EPA. In a 5-4 decision, the justices temporarily blocked the agency’s “good neighbor” plan designed to reduce air pollution from power plants. The ruling puts the plan on hold while legal challenges to it are heard in federal court.
The court has yet to issue its highly anticipated ruling addressing what’s known as the Chevron doctrine, which gives federal agencies the latitude to regulate areas where Congress has been ambiguous. During oral arguments, the court’s conservative justices seemed prepared to at least chip away at the precedent, or perhaps toss it entirely, further weakening agencies’ power.
