SEC unable to lift temporary ban on in-house judges

Judge rules the agency did not meet the criteria for a stay and “has not demonstrated likely success” in its argument that the administrative law judge process is constitutional.

The Securities and Exchange Commission lost one of its latest bids to rebuff legal challenges to its use of administrative proceedings.
District Court Judge Richard Berman in New York on Friday denied the agency’s request to lift a preliminary injunction while the court hears a challenge brought by Barbara Duka, a former managing director at Standard & Poor’s Ratings Services, that claims the SEC proceedings violate the Constitution because of the way administrative judges are appointed and overseen.
Mr. Berman said the SEC did not meet the criteria for a stay, and “has not demonstrated likely success” in its argument that the administrative law judge process is constitutional.
(More: Judge denies SEC’s motion to dismiss case over in-house panels)
Mr. Berman also rejected the SEC’s argument for allowing its administrative case against Ms. Duka to continue, saying she would suffer irreparable harm. On that broader question of which process serves the public interest, Mr. Berman said, “it is of the utmost importance to the public that complex constitutional questions be resolved as the outset, with finality” and through the courts.
(More: SEC appointment of in-house judges ‘likely unconstitutional’)
In a related case, the SEC was forced to temporarily stay its administrative case against Patriarch Partners and CEO Lynn Tilton, while Ms. Tilton and Patriarch Partners appeal an administrative decision to the 2nd U.S. Circuit Court of Appeals in New York.
Hazel Bradford is a reporter at sister publication Pensions & Investments.