Federal Judge Says SEC’s Use of In-House Judges “Likely Unconstitutional”

A federal judge in Atlanta has temporarily halted the SEC’s insider trading case against Charles Hill, finding that the use of an in-house judge to preside over the administrative proceeding is “likely unconstitutional,” according to a Wall Street Journal report.

The SEC has five administrative law judges to hear cases the agency decides not to try in federal court.  Following the passage of Dodd-Frank, the SEC has tried a majority of its cases before its in-house judges, electing to file the suits as administrative proceedings rather than federal court cases.

Hill, an Atlanta real estate developer, was charged by the SEC with making illicit profits from a trading tip he allegedly received from a friend.  Hill sued the SEC in federal court to block the administrative proceeding, citing a WSJ article in May 2015 that said the agency won 90% of its cases tried before in-house judges from October 2010 to March 2015.

Hill’s case was set to be tried before SEC administrative law judge James Grimes, who was hired by the agency through its office of in-house judges rather than by appointment approved by the five commissioners.

U.S. District Judge Leigh Martin May ruled that Hill had a “substantial likelihood of success” arguing that the SEC appointment of Grimes violated the Appointments Clause in Article II of the Constitution.  She found that the Constitution requires the appointment of an “officer” such as an administrative law judge be made by agency leadership, the president or the courts, not more junior officials.

Whether you are facing a serious federal white-collar prosecution, a state murder charge, or misdemeanor charges, The Cogdell Law Firm has the experience, knowledge and reputation you want for your legal team.  When results matter most, contact Dan Cogdell at 713-426-2244 or info@cogdell-law.com.

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