High Court Won't Review SEC Forum Challenge

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By Phyllis Diamond

April 25 — A man charged by the Securities and Exchange Commission with selling unregistered securities April 25 lost his bid for U.S. Supreme Court review of a federal appeals court decision rejecting his challenge to the constitutionality of the agency's administrative forum.

The move marks the second time in less than a month that the justices have declined to take up a decision involving claims that the way the SEC's in-house judges are hired is constitutionally infirm (60 SLD, 3/29/16).

Unregistered Securities

In this case, an administrative law judge found Canadian resident Gordon Brent Pierce liable for selling unregistered securities. Pierce appealed the decision to the U.S. Court of Appeals for the District of Columbia Circuit, but a D.C. Circuit panel rejected his challenge to the merits of the allegations.

Pierce then appealed to the full circuit court adding a constitutional challenge to the forum itself. Denied en banc review, he later took only the constitutional challenge to the Supreme Court. He argued that as “inferior officers” under the constitution's Appointments Clause, the agency's ALJs aren't properly hired—a claim similar to several that are working their way through the federal courts.

In March, the commission urged the justices not to take up the controversy, saying Pierce's challenge can't be properly reviewed (56 SLD, 3/23/16). “Neither the court of appeals nor the Commission considered the merits of his constitutional arguments because he never presented it to the Commission and he raised it in the court of appeals for the first time in a rehearing petition,” the SEC wrote.

Last month, the high court declined to take up a Seventh Circuit ruling rejecting a former assisted living executive's challenge to the constitutionality of the SEC's administrative forum (60 SLD, 3/29/16). The Seventh Circuit didn't directly address the constitutional issue, holding only that respondent Laurie Bebo couldn't pursue her constitutional claims until the administrative case against her concluded.

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com