Clifford Chance

U.S. Supreme Court Curbs SEC’s In-House Enforcement Proceedings, Inviting More Challenges To Other Agencies

July 15, 2024

On June 27, 2024, the U.S. Supreme Court in SEC v. Jarkesy ruled by a 6-3 margin that the Securities and Exchange Commission's in-house administrative law judges lack constitutional authority to impose civil monetary penalties for violations of the antifraud provisions of the federal securities laws. Instead, the Court held that the Seventh Amendment to the U.S. Constitution entitles defendants in these cases to a jury trial. Jarkesy is the latest in a string of decisions by the Supreme Court curbing the SEC's enforcement power on constitutional grounds. This decision could impact how parties resolve enforcement actions by the SEC, and it could invite challenges to other federal agencies' use of administrative proceedings to prosecute fraud claims. Moreover, the decision leaves open the prospect for broader challenges to the administrative adjudicative function by numerous federal agencies, including the U.S. Federal Trade Commission.

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