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In a landmark case, the Securities and Exchange Commission (SEC) faces a trifecta of constitutional challenges, creating a legal spectacle that could reshape administrative law. The U.S. Court of Appeals for the 5th Circuit has invalidated three aspects of the SEC’s operations, sparking a constitutional debate that now rests in the hands of the Supreme Court.

The case, Securities and Exchange Commission v. Jarkesy, revolves around the SEC’s authority in administrative proceedings, bringing to light three distinct constitutional challenges. The first challenge questions whether Congress constitutionally authorized the SEC to adjudicate administrative proceedings imposing monetary penalties. The dispute hinges on the “public rights” doctrine, exploring whether administrative agencies can impose fines without a jury trial.

While the government argues for Congress’s broad authority to create new obligations, Jarkesy challenges the very existence of the public rights doctrine, asserting that it violates historical principles and the foundations of the American Revolution. The outcome of this debate may significantly impact the SEC’s ability to enforce penalties through administrative proceedings.

The second question probes Congress’s power to delegate to the SEC the decision of pursuing a case through administrative proceedings or federal district court. The government contends that Congress has the authority to determine the range of enforcement mechanisms, while Jarkesy argues that such delegation constitutes an impermissible transfer of legislative power.

The third challenge questions whether Congress can grant SEC’s administrative law judges protection from removal. This issue delves into the broader question of the separation of powers and the extent to which tenure protection can be afforded to adjudicators. The Supreme Court’s 2010 decision in Free Enterprise Fund v. Public Company plays a pivotal role in this debate, and the outcome may have far-reaching implications for the administrative state.

source: Supreme Court to consider multi-pronged constitutional attack on SEC – SCOTUSblog

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