Breaking: Supreme Court Limits SEC’s Use of In-House Trials in Fraud Cases

Maxwell Mutuma
June 27, 2024 Updated June 28, 2024
Why Trust CoinGape
CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Breaking: Gary Gensler To Step Down As US SEC Chair In January

Highlights

  • The Supreme Court has restricted the SEC's use of in-house trials, ruling that defendants in fraud cases deserve a jury trial in federal court.
  • This decision overturns the SEC's previous method of handling specific securities fraud cases through internal administrative procedures.
  • The ruling could impact how other regulatory agencies operate, reflecting the Court's trend of limiting federal regulatory powers.

The Supreme Court has significantly limited the powers of the Securities and Exchange Commission (SEC) by ruling that defendants in fraud cases have a right to a jury trial in federal court. This ruling overturns the SEC’s long-standing practice of resolving some securities fraud complaints through in-house proceedings, declaring them unconstitutional.

SEC’s In-House Fraud Trials Ruled Unconstitutional

The Supreme Court’s decision disrupts the SEC‘s approach to handling civil fraud complaints. Previously, the agency conducted many of these proceedings in-house, where administrative law judges appointed by the SEC presided. However, the court’s recent decision mandates that these cases should instead be heard in federal courts, providing defendants with the constitutional right to a jury trial.

The change comes after the agency reported imposing over $5 billion in civil penalties in the 2023 government fiscal year. How much of this amount was secured through in-house proceedings remains to be seen. In anticipation of the Supreme Court‘s decision, the SEC had already scaled back the number of cases it initiated in administrative settings.

Also Read: Ripple CLO Spotlights SEC’s Setback In Proxy Advisory Firms Rule

Court Limits Powers of Federal Regulator

This ruling alters the SEC’s enforcement strategy and sets a precedent that may affect other regulatory bodies. The decision underscores a broader trend where the current Supreme Court, influenced by conservative and business interests, has sought to limit the scope of federal regulators. For instance, in a prior decision, the court curtailed the powers of environmental agencies to regulate water pollution.

Additionally, the case, initiated by Houston hedge fund manager George R. Jarkesy against stiff penalties imposed by the SEC, highlighted the disparity in case outcomes between federal courts and in-house proceedings. Jarkesy’s lawyers pointed out that the SEC had a higher success rate in administrative settings than federal courts, winning almost all cases in the former but only about 60% in the latter.

The 5th U.S. Circuit Court of Appeals previously supported Jarkesy’s position, stating that Congress had granted the SEC “unfettered authority” to decide the forum for trying cases, an unconstitutional power. Moreover, the court criticized laws that protect the SEC’s administrative judges from being dismissed by the president, suggesting such protections also violate constitutional norms.

Also Read: Bloomberg Analyst Predicts Solana ETF To Launch In 2025

 

Advertisement
coingape google news coingape google news
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
Maxwell is a crypto-economic analyst and Blockchain enthusiast, passionate about helping people understand the potential of decentralized technology. I write extensively on topics such as blockchain, cryptocurrency, tokens, and more for many publications. My goal is to spread knowledge about this revolutionary technology and its implications for economic freedom and social good.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.