The Securities and Exchange Commission must stop an administrative enforcement proceeding because its appointment of judges hearing such cases is likely unconstitutional, U.S. District Judge Richard Berman ruled in New York on Wednesday.
The challenge to the SEC tactic was brought by former Standard & Poor's Ratings Services Director Barbara Duka, whom Mr. Berman said “has demonstrated irreparable harm along with a substantial likelihood of success” of her claims that the administrative process is faulty, Mr. Berman wrote in the order entering a preliminary injunction. The parties were ordered to appear for a scheduling conference on Sept. 16.
Ms. Duka was charged by the SEC with overseeing misleading ratings of commercial mortgage-backed securities. She is seeking to have the SEC order overturned. The judges hearing such cases “were not appropriately appointed,” Mr. Berman wrote.