The United States Supreme Court on Thursday questioned the ability of the American financial markets watchdog, the SEC, to sanction individuals or companies via its own administrative judges rather than going through ordinary civil justice. This is a major setback for the SEC, likely to have effects on all government agencies and their litigation.
Many Republican lawmakers want to curb the authority of these agencies and government bodies, arguing that they are overstepping their authority and encroaching on Congress. The case that the nation’s highest court ruled on involved financier George Jarkesy, who was sued by the Securities and Exchange Commission for lying to investors about the value of two funds and his investment strategy.
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“No limits”
The stock market regulator had, as authorized by law, referred the case to an administrative judge who is only authorized to examine cases brought to him by the SEC. The magistrate had sentenced George Jarkesy to a fine of $300,000 and to reimburse $685,000 in “illicit gains”The financier then appealed the judgment in civil court. A federal appeals court ruled in his favor and overturned the first instance decision.
Appeals judges ruled that the ruling violated the Seventh Amendment to the US Constitution, which guarantees litigants the right to a trial before a jury of their peers in civil cases involving a minimum award. The magistrates rejected the so-called jurisprudence of “public rights”established since the 19th century and which allows public agencies to refer to administrative justice for cases opposing the State to an individual or an organization.
The Supreme Court, seized by the government, took up this argument in its decision rendered on Thursday, by six votes to three, those of the conservative judges against the progressives, considering that this case did not fall within the scope of facts that could be handled by administrative judges. “The authority that the government wants to use in this matter has no limits.”, wrote the President of the Court, John Roberts, on behalf of the six judges who chose to validate the decision handed down on appeal. By reaffirming the principle of the right to a trial before a jury, the Court considers “not to deprive the SEC of any recourse or power”. “The agency can pursue George Jarkesy as it always has” in the past, namely “before a judge, in the presence of a jury”according to the ruling.
