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SEC Shifts from Courts to Internal “Administrative Law Judges”


The SEC has recently suffered some losses at trial, and these have occurred almost entirely in insider trading cases. Is the shift from courts to administrative proceedings a response to these losses? . . .

Perhaps the SEC is not merely responding to its losses, but the underlying reality is obvious enough. According to [SEC Enforcement Director] Ceresney, one of the factors that will lead the SEC to chose administrative adjudication is “whether the case would play well before a jury.” No kidding.

The SEC clearly hopes to use administrative proceedings to evade the constitutional right to jury. When discussing the recent trial losses suffered by the SEC, Ceresney defended its evasion by talking about the SEC as if it were a victim of unfortunate circumstances in court — circumstances that ordinarily are called juries. He said that insider trading actions are “challenging cases for us.” “Among other problems, the evidence is ‘typically circumstantial’ and the SEC cannot produce ‘victim witnesses’ to sway juries. He also said that juries — perceiving the SEC as similar to criminal authorities — apply a ‘higher standard than the preponderance of the evidence standard’ to commission cases.”

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