The U.S. solicitor general on Wednesday asked the Supreme Court to address the legal status of administrative law judges at the Securities and Exchange Commission, whose authority has been challenged as a possible violation of the Constitution's appointments clause.
The solicitor general's brief asked the Supreme Court to take the case petitioned by former investment adviser Raymond Lucia, who was banned from the industry for life by an SEC administrative law judge in 2013 for alleged misrepresentations in a "buckets of money" retirement wealth management strategy. Mr. Lucia argued that the case should be overturned because the in-house judge was not properly appointed. Several other cases arguing the constitutionality of SEC ALJ decisions are pending in lower courts, prompting the solicitor general to argue for the Supreme Court to resolve the issue.
Reversing the federal government's position in such challenges, the solicitor general's Supreme Court brief said the in-house judges are not just employees but instead inferior officers who should be subject to the appointments provision, which governs how government agencies hire the judges. Cases already decided by SEC administrative law judges are not affected.
On Thursday, the SEC ratified its prior appointment of the five current administrative law judges, "to put to rest any claim that administrative proceedings pending before, or presided over by, commission administrative law judges violate the appointments clause," the SEC said in a statement.
It also directed administrative law judges presiding over pending proceedings for which no initial decision has yet been issued to reconsider those records and allow parties to submit any new evidence relevant to a re-examination of the record.
In addition to the five current SEC administrative law judges, a Supreme Court decision could affect thousands of other government in-house judges.
SEC lawyers filed 28 letters Wednesday to the courts handling related cases challenging the ALJ process, asking them to hold them in abeyance until the Supreme Court rules. A decision by the Supreme Court to take the Lucia case is expected within the next few weeks.
