The securities world’s collective eyes were on the Supreme Court and whether it would find the Securities and Exchange Commission’s administrative law judge system to be constitutional. But even after the court dealt the SEC’s ALJ proceedings a blow in a landmark decision last month, securities law practitioners are yet unsure what the fallout will look like.
In Raymond Lucia, et al v. SEC, the Supreme Court held that SEC ALJs are “officers of the United States,” mean-ing that they can only be appointed by the President, the courts or “heads of departments” under the Constitution’s Appointments Clause. The Supreme Court ruled 7-2 that Lucia’s case was heard by an ALJ who wasn’t constitutionally appointed and that the respondent was therefore entitled to a new hearing before a different ALJ. But the June 21 Lucia decision raises questions as to what will happen to the other cases heard by SEC ALJs, and even ALJs in other federal agencies.