SEC Files Third Appeal of Halted Administrative Case

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By Rob Tricchinelli

Jan. 15 — The Securities and Exchange Commission is seeking Eleventh Circuit review of a third district court order, all from the same judge, halting an administrative proceeding to allow the respondent to challenge the constitutionality of the forum.

Judge Leigh Martin May of the U.S. District Court for the Northern District of Georgia has paused three SEC enforcement proceedings in light of constitutional challenges from the respondents. In this case, the SEC accused Ironridge Global Partners LLC of operating as an unregistered dealer (222 SLD, 11/18/15).

May halted a case against Charles Hill in June and against Gray Financial Group Inc. in August (110 SLD, 6/9/15). The SEC has appealed all three to the U.S. Court of Appeals for the Eleventh Circuit.

Constitutional Challenge

In all three cases, the administrative respondents brought their challenge into federal court, arguing that the agency's in-house forum doesn't pass constitutional muster.

They argue that the hiring of the SEC's in-house judges violates the Constitution's Appointments Clause. They assert that administrative law judges are “inferior officers” in the executive branch, making their appointment inconsistent with Article II because it is done through internal agency hiring procedures and not by the commissioners.

In all three cases, May has said they have a “substantial likelihood of success on the merits” of their constitutional claims.

In the Hill and Gray cases, briefing on the constitutional issues is already underway.

The Seventh Circuit (164 SLD, 8/25/15) and D.C. Circuit(189 SLD 189, 9/30/15) have rejected similar claims but largely avoided the constitutional merits. Those courts said the challenge was improperly brought in federal court because the in-house proceedings hadn't yet concluded.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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