Appeals Court Throws SEC Judges’ Rulings Into Question

The Securities and Exchange Commission’s Administrative Law Judges should be appointed to their positions, like ALJs in other federal agencies, the Tenth Circuit Court of Appeals ruled this week. The ruling – the first time in 36 years that the 10^th Circuit has vacated an administrative decision by the SEC – could nullify hundreds of decisions made by ALJs in securities cases from six states. The court was considering a case in which Administrative Law Judge Cameron Elliot fined David Bandimere, one of the founders of a Colorado race track, $1.2 million for allegedly assisting a Ponzi scheme that bilked $20 million from about 200 people in 13 states. But in a 2-1 ruling, the appeals court said Elliot was not properly in the position to make that determination, because he and his four judicial colleagues were hired through a civil service process by the federal personnel office, which the court says is in violation of the Appointments Clause to the U.S. Constitution. The court’s finding runs contrary to an August 2016 determination by the U.S. Court of Appeals for the D.C. Circuit, which ruled 3-0 that SEC judges were employees who did not need to be appointed.