SEC Will Rehear Dozens of Cases After Supreme Court Ruling

Posted August 23, 2018 10:17 p.m. EDT
Updated August 23, 2018 10:23 p.m. EDT

The Securities and Exchange Commission said it would rehear dozens of cases recently brought before its in-house judges, in response to the Supreme Court’s ruling that the judges had not been properly appointed.

Lawyers for the commission said in a court filing late Wednesday that the agency had reaffirmed the appointments of the same five administrative law judges who had been hearing cases before it put a stay in place in June. The filing ended the stay and said that any pending cases would be reheard by a different in-house judge.

The SEC uses administrative law judges in cases where it has identified misconduct by someone involved in securities markets — like an investment adviser or fund manager — and is seeking to fine or bar that person from the industry. Raymond Lucia, a California-based money manager whom an administrative judge fined and barredd for life, challenged the agency’s use of the judges.

Lucia’s case reached the Supreme Court, which ruled on June 21 that the SEC had failed to properly appoint judges, because they had been selected by staff members at the agency rather than being appointed by the commissioners themselves. The failure meant the judges did not have constitutional authorization to decide cases, the court ruled.

The court ordered Lucia’s case to be reheard, and the SEC included it on the list in Wednesday’s filing of more than 100 cases it would begin work on again.

Lucia, who for years promised investors “buckets of money” in radio advertisements, could not be reached for comment.

C. Evan Stewart, a partner at Cohen & Gresser and an expert in securities cases, said the commission’s decision was a cautious one. “It’s crossing the T’s and dotting the I’s, as required by the Supreme Court,” he said. “You’ve got to go back to ground zero and start all over again.”

But Stewart said it was highly unlikely the outcomes of the cases would change, or that the commission would stop pursuing a case it had to start over again.

“If they’ve made a commitment to try a case, after that commitment is made, they don’t change their minds,” he said.