In what will be a dramatic change for the Securities and Exchange Commission (SEC), the Supreme Court has ruled that when the SEC seeks civil penalties against a defendant for securities fraud, the defendant is entitled to a jury trial.
Currently, the SEC may adjudicate cases in house typically with an Administrative Law Judge.
The case, SEC v. Jarkesy, pertained to a case for civil penalties regarding an enforcement action against investment adviser George Jarkesy, Jr., and his firm, Patriot28, LLC. The SEC alleged violations of the “antifraud provisions” pertaining to federal securities laws. The final order by the SEC determined that Jarkesy and Patriot28 had committed securities violations and levied a civil penalty of $300,000. Jarkesy and Patriot28 fought the decision which ended up in the Supreme Court.
The Fifth Circuit court had vacated the order on the ground that adjudicating the matter in-house violated the defendants’ Seventh Amendment right to a jury trial.
Justices Sotomayor, Kagan and Jackson dissented on the opinion with Sotomayor writing the dissent.
Chief Justice Roberts authored the opinion for the majority.
The ruling may cause the SEC to be more thoughtful in pursuing certain enforcement actions going forward.
