SEC Asks High Court to Take Up In-House Judge Dispute

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By Antoinette Gartrell

A second request has landed at the U.S. Supreme Court asking it to rule on the constitutionality of the Securities and Exchange Commission’s administrative forum—this one from the SEC.

The agency wants the court to take up a decision against it by the U.S. Court of Appeals for the Tenth Circuit, in a case involving Colorado businessman David Bandimere. It’s the only federal appeals court to find that the way the SEC’s administrative law judges are hired doesn’t pass constitutional muster ( Bandimere v. SEC, U.S., No. 17-____, petition filed 9/29/17 ).

A request for the justices to consider a case from the D.C. Circuit rejecting a similar constitutional challenge is pending. The SEC’s response in that case is due Oct. 25.

The SEC Sept. 29 asked the high court to hold its petition until it has acted on investment adviser Raymond Lucia’s bid for review in the D.C. Circuit case. If the justices decline to review the Lucia case, it should deny the petition in Bandimere as well, the agency said.

Bandimere’s attorney, David Zisser of Jones & Keller, Denver, a former SEC enforcement lawyer, declined to comment.

Bandimere

Bandimere was found liable by an SEC ALJ for acting as an unlicensed broker in connection with a Ponzi scheme. The commission upheld the ALJ’s decision and Bandimere appealed to the Tenth Circuit. He claimed the ALJ was acting as an “inferior officer” under the Appointments Clause and wasn’t appointed to his post in a constitutional manner—that is, by the president, a federal judge or the head of the agency.

The Tenth Circuit panel parted ways with the D.C. Circuit and agreed with Bandimere that the appointment of SEC ALJs violated the Constitution. In early May, the full Tenth Circuit declined to review the panel ruling.

To contact the reporter on this story: Antoinette Gartrell in Washington at agartrell@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

For More Information

To view the petition, visit: http://src.bna.com/s3V

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