One of the last decisions handed down by the U.S. Supreme Court this June before it recessed for the summer could affect anyone who’s accused of securities fraud and facing an enforcement action by the Securities and Exchange Commission (SEC).
In a 6-3 ruling, with the more conservative justices in the majority, the court ruled that these enforcement actions involving alleged securities fraud should be handled by the federal court rather than through the agency’s internal tribunals.
Majority said tribunals violate Seventh Amendment rights
In the majority opinion, the justices said that these tribunals violate defendants’ constitutional right to a federal jury trial in civil cases involving over a designated value. That right is codified in the Seventh Amendment.
In writing for the majority, Chief Justice John Roberts said that a defendant in a fraud suit has “the right to be tried by a jury of his peers before a neutral adjudicator. Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch.”
Ruling further limits federal agencies’ authorities
That dissent, written by Justice Sonia Sotomayor on behalf of herself and Justices Kagan and Brown Jackson, noted that “dozens of agencies could be stripped of their power to enforce laws enacted by Congress.” The majority ruling in this case is in line with other recent decisions where the justices split along conservative/liberal ideological lines that restrict the authority of agencies that are part of the executive branch.
In response to the ruling, the head of the SEC’s Enforcement Division said that it will “continue to protect investors and enforce the federal securities laws, including by filing actions in federal court.”
Dealing with an allegation of securities fraud can be complicated and more than a little unnerving. That’s why anyone who is even under investigation should get legal guidance as soon as possible to protect their rights.