ALJ Decision Results in SEC Retrying Enforcement Actions

The Supreme Court decision in Lucia v. SEC  that the in-house SEC administrative law judges (“ALJ”) were not properly appointed and put in office has resulted in the Securities and Exchange Commission (“SEC”) issuing an order to retry over 120 enforcement actions.   In the order, the SEC reiterated their approval of the appointments of Chief Administrative Law Judge Brenda Murray and Administrative Law Judges Carol Fox Foelak, Cameron Elliot, James E. Grimes, and Jason S. Patil to the office of administrative law judge in the SEC.

In light of the Supreme Court’s decision in Lucia v. SEC, the SEC had previously stayed any pending administrative proceeding initiated by an order instituting proceeding that commenced the proceeding and set it for hearing before an ALJ, including any proceeding currently pending before the SEC.  The SEC allowed the stay to expire effective August 22, 2018, and has remanded all proceedings currently pending before the SEC to the Office of Administrative Law Judges for this purpose, and vacate any prior opinions.  In these matters, as well as the matters currently pending before an ALJ, the SEC directed that the conduct of further proceedings would be consistent with the order and the Court’s decision in Lucia v. SEC.

It appears that the SEC is setting expectations as to the timeline of resolving the backlog of new enforcement actions as the ALJs were directed to notify the parties in the cases pending before them of the order and in each proceeding.  Additionally, absent express agreement by the parties regarding alternative procedures, the Chief Administrative Law Judge will by rotation to the extent practicable, designate an ALJ who did not previously participate in the matter to be the presiding hearing officer.  Any agreement by the parties regarding alternative procedures must be submitted to the Chief Administrative Law Judge by September 7, 2018 and in all cases, assignments shall be made no later than September 21, 2018.

Finally, within 21 days of being assigned to the proceeding, the ALJ shall issue an order directing the parties to submit proposals for the conduct of further proceedings.  After considering the parties’ submissions, the ALJ shall hold a new hearing and prepare an initial decision; or if a party fails to submit a proposal, the ALJ may enter a default against that party pursuant to Rule of Practice 155 or impose another appropriate sanction under Rule of Practice 180.

For full copy of the Order and a list of the enforcement actions impacted, Click Here.