SEC Judges Not Properly Appointed, Adviser Tells High Court

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By Jennifer Bennett

SEC administrative law judges’ appointments are constitutionally defective, an investment adviser told the U.S. Supreme Court today.

Raymond J. Lucia and his investment advisory firm also told the court in their Feb. 21 brief that efforts by the Securities and Exchange Commission to fix the problem are inadequate. New proceedings are needed to cure unconstitutional actions taken by the ALJs.

Lucia’s litigation could affect more than 100 cases currently at the SEC, along with a dozen that are on appeal in the federal courts.

Lucia was fined $300,000 and barred from working as an investment adviser after an SEC judge found he misled prospective clients. He appealed, arguing that the ALJ’s decision should be thrown out because the ALJ wasn’t properly appointed.

Certain government officials are “officers” under the Constitution. The Appointments Clause mandates that officers must be appointed by the president, a federal judge, or the head of their agency. In the past, the SEC didn’t consider its ALJs officers, and didn’t follow those procedures in appointing them.

The SEC in November 2017 tried to fix the problem, conceding its five ALJs are officers and ratifying their appointments. The agency’s ALJs have been ratifying their past actions on an ongoing basis since.

However, that doesn’t make up for past constitutional defects in ALJ proceedings, according to Lucia’s brief. New proceedings are constitutionally required to remedy the SEC ALJs’ unconstitutional actions, Lucia said.

About 150 ALJs at other government agencies and departments preside over adversarial enforcement proceedings, according to the brief. It’s unclear whether all of those are officers whose appointment is subject to the Appointments Clause.

The case is Lucia v. SEC , U.S., No. 17-00130, petitioners’ brief filed 2/21/18 .

To contact the reporter on this story: Jennifer Bennett in Washington at

To contact the editor responsible for this story: Seth Stern at

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