The Securities and Exchange Commission lost another bid to stop a money manager’s lawsuit challenging the use of administrative proceedings.
U.S. District Court Judge Leigh Martin May in Atlanta on Sept. 24 denied the agency’s request to lift a preliminary injunction while the court hears a challenge brought by Gray Financial Group, which is arguing that the SEC’s administrative law judge process is unconstitutional.
Ms. May said the SEC’s motion to stay the injunction was not warranted for several reasons, including several other U.S. District Court rulings where “the SEC has not made a strong showing it is likely to succeed” in arguing that their in-house process is constitutional. She added the SEC could pursue such proceedings if they are conducted by the SEC commissioners, or by administrative judges they appoint.
“The SEC argues that the public interest is particularly affected here because the plaintiffs are essentially bad apples managing millions of assets who should be barred from the industry … but even assuming (for the sake of argument) the plaintiffs did and continue to do what the SEC claims, that does not give the government the right to institute an unconstitutional administrative process against them,” Ms. May said in the order.
