Supreme Court Ruling Challenges Decisions by ALJs Not Properly Appointed
The U.S. Supreme Court has ruled that the SEC must approve the appointment of Administrative Law Judges, thereby invalidating the appointment of ALJs appointed by SEC staff members. The Constitution’s Appointments Clause requires officers of the United States to be appointed by the President, a court of law, or a head of department. The Supreme Court opined that ALJs are “officers” and not mere employees because ALJs occupy a continuing office and exercise powers similar to a trial judge (e.g. discovery, subpoenas, admissibility, sanctions). The Court ordered a new hearing before an ALJ appointed by the SEC.
OUR TAKE: This decision opens the door to a re-hearing in every case decided by an ALJ not appointed by the SEC. Many industry observers and respondents have questioned the fairness of the ALJ process given that the SEC hardly ever loses a case.