Last year, the Enforcement Division of the SEC announced its intention to bring more enforcement actions in its own administrative forum rather than in federal court. The authors describe these administrative proceedings under the Commission’s Rules of Practice, beginning with the filing of charges, the run-up to the hearing, the hearing itself, and the appeal process. Although there are significant differences between the SEC’s rules and those of a federal district court, not all such differences, the authors find, favor the Enforcement Division.

The Enforcement Division of the U.S. Securities and Exchange Commission last year announced its intention to bring more enforcement actions in its own administrative forum, rather than in federal district court. Since that time, several federal lawsuits and a growing chorus of defense lawyers have argued that SEC enforcement actions brought in its administrative forum are unconstitutional and generally give the Enforcement Division an unfair advantage. A recent analysis indicates that the SEC Staff won all six contested administrative hearings in fiscal year 2014 and, in the same year, instituted twice as many administrative cases as it did in fiscal year 2009. Similarly, the SEC won nine out of 10 contested administrative proceedings in fiscal year 2013 and all seven in fiscal year 2012. While the benefits of “home court” advantage for the Division should not be discounted, the Division’s published win rate may have more to do with how it counts a “win” and with the types of cases it has historically chosen to bring administratively — delisting proceedings and matters against registered persons and accountants, for example, which tend to be more straightforward. In the past, there have been noteworthy rulings by SEC ALJs that fully exonerated respondents or gave the Division only partial victories.

Originally published in The Review of Securities & Commodities Regulation on May 6, 2015.