D.C. Circuit Repulses Assault on the SEC’s Administrative Citadel

by Burr & Forman

The citadel of the SEC’s administrative forum has been under assault from several vectors over the past year or so, as a chorus of dissenting Respondents have mounted increasing challenges to its constitutional legitimacy, as well as it policy wisdom. The arguments were starting to get some traction, but two recent appellate decisions have repulsed the attack, including the D.C. Circuit’s September 29 Jarkesy opinion.

The arguments were gaining some momentum. First, they elevated the policy discussion to new prominence. SDNY Judge Jed Rakoff weighed in expressing doubt about the wisdom of developing federal securities law within the agency’s confines.

Then Justice Scalia expressed doubt about the SEC’s insider-trading theories and their adherence to long-established principles of criminal law.

Indeed, Commissioner Piwowar even urged greater transparency in the use of the administrative forum.

The US Chamber of Commerce issued a white paper recommending far-reaching reforms.

And most recently, the Commission itself took a hesitate step down the road, proposing some updates to its Rules of Practice (mostly as to docket speed and limited depositions).

Second, Respondents kept hammering on the door. Early attempts were rebuffed for lack of jurisdiction (Jarkesy and Bebo), but Hill and Duka broke through – overcoming the jurisdictional hurdle and obtaining stays of administrative proceedings as “likely unconstitutional.” Jarkesy v. SEC, 48 F. Supp. 3d 32 (D.D.C. 2014); Bebo v. SEC, No. 15-1511, 2015 WL 4998489 (7th Cir. Aug. 24, 2015); Hill v. SEC, No. 1:15-CV-1801, 2015 WL 4307088 (N.D. GA June 8, 2015)(app. pending); Duka v. SEC, No. 15 Civ. 357, 2015 WL 1943245 (S.D.N.Y. Apr. 15, 2015)(app. pending).

But the first two appellate decisions have repulsed the assault. In Bebo, the Seventh Circuit affirmed dismissal for lack of jurisdiction. Then on September 29th, the D.C. Circuit became the second appellate court to hold that, in the ’34 Act, Congress intended the SEC’s administrative-then-judicial review in-house process to “provide an exclusive avenue for judicial review” that cannot be bypass by a pre-emptive assault in district court. Jarkesy v. SEC, No. 14-5196 (D.C. Cir. Sept. 29, 2015).

The Jarkesy panel held that Congress intended post-Commission judicial review to be the exclusive avenue for defense against Commission administrative actions, under the long-standing rationale of Thunder Basin Coal co. v. Reich, 510 U.S. 200 (1994). The panel left the door open just a crack, in that its holding applies to Jarkesy’s facts and arguments – the “mine-run” of common cases – and noting that a facial, more “structural,” challenge under the Art. II non-delegation argument “presents a closer question.” Jarkesy’s challenges (Fifth Amendment Due Process, Equal Protection and Brady challenges) were more in the realm of “as-applied” than structural. And indeed, the opinion hints that as the case progressed, Jarkesy attempted to refine and “bend” those arguments more toward the “structural” theories of attack that succeeded in Hill and Duka. Nevertheless, the Jarkesy Court held that issue pretermitted by the statutory scheme prescribing appeal from Commission decisions to the Respondent’s choice of her home Circuit or the D.C. Circuit. Finally, the Court distinguished Free Enterprise, because these “mine-run” cases do not require a “bet-the-farm” “Trojan-challenge” in order to obtain judicial review. But the opinion left unaddressed what it takes a Respondent in resources and the will to sustain collateral consequences long-enough to get there.

In the meantime, the SEC held that its administrative forum isn’t unconstitutional. On September 17, the Commission’s Timbervest decision rebuffed the “structural” arguments now pending appeal at the 11th and 2nd Circuits in Hill and Duka. Timbervest’s next stop is either the 11th or D.C. Circuit. Stay tuned.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Burr & Forman | Attorney Advertising

Written by:

Burr & Forman

Burr & Forman on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.