The Supreme Court on Thursday imposed new limits on the Securities and Exchange Commission’s authority to enforce securities laws, ruling 6-3 that the use of in-house judges violates the right to trial by jury. This decision is part of a broader trend of rulings targeting the powers of federal agencies, often supported by the court’s conservative majority.
The challenge focused on the SEC’s practice of using in-house administrative law judges to adjudicate cases, a method criticized for allegedly violating defendants’ rights and giving the SEC an unfair advantage. Hedge fund manager George Jarkesy brought the case after facing SEC allegations of securities law violations through misstatements and omissions while managing hedge funds. Jarkesy and his firm were penalized $300,000 and ordered to return nearly $685,000 in gains following an in-house proceeding in 2014.
The legal challenge was supported by billionaires Elon Musk and Mark Cuban. The 5th Circuit U.S. Court of Appeals previously ruled against the SEC, leading the agency to seek intervention from the Supreme Court. The ruling curtails the SEC’s ability to use its in-house adjudication process, likely prompting the agency to rely more on federal court proceedings for enforcement actions.
