Fifth Circuit Holds That SEC Administrative Law Courts Are Unconstitutional

The most recent salvo in the long-running dispute about the constitutionality of the Securities and Exchange Commission’s (SEC) administrative law courts was launched May 18 in a U.S. Court of Appeals for the Fifth Circuit decision, Jarkesy v. SEC, and it’s a bracing read. Unlike prior decisions on the subject, which contented themselves with chipping away at the edges of the SEC’s administrative authority, the Fifth Circuit didn’t pull punches. It held that the SEC’s in-house courts violate a trifecta of constitutional protections: the Seventh Amendment’s right to a jury trial, the prohibition in Article I on excessive delegation of Congress’ “legislative power,” and the restrictions in the “Take Care” clause of Article II as applied to the removal of SEC administrative law judges (ALJs).