The Securities and Exchange Commission late on June 22 put on hold cases being heard by its in-house administrative law judges, following a Supreme Court ruling June 21 questioning how they are selected.
"In light of the Supreme Court's decision in Lucia v. SEC, we find it prudent to stay any pending administrative proceeding initiated by an order instituting proceedings that commenced the proceeding and set it for hearing before an administrative law judge, including any such proceeding currently pending before the commission," the stay order said. It applies to all pending cases and those on appeal to the commission itself.
The stay is in effect for 30 days "or further order of the commission," the order said, but does not preclude the SEC from assigning a currently pending case to the commission or any commissioner "at any time."
The Supreme Court's 7-2 decision reversed and remanded the case brought 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. In June 2017, the U.S. Court of Appeals for the District of Columbia Circuit upheld the constitutionality of SEC in-house judges.
The Supreme Court heard the case in part because of an opposite ruling by a 10th U.S. Circuit Court of Appeals panel in Denver, which found that the administrative law judge hiring process violates the Constitution.
The Supreme Court did not address the question of how such judges can be removed.