SEC loses another case over the use of in-house judges

Ironridge Global Partners became the latest investment firm to win a preliminary injunction against a Securities and Exchange Commission administrative proceeding, in a ruling issued by U.S. District Judge Leigh Martin May in Atlanta on Tuesday. Ironridge Global, a San Francisco-based equity investor in microcap companies, filed a civil complaint after the SEC started an enforcement action against it on June 23 for allegedly operating as a broker-dealer without registering as one. The SEC administrative law judge process “is tailor-made to favor the SEC,” Ironridge's complaint said. (More: SEC appointment of in-house judges 'likely unconstitutional') Ms. May said in her order that the plaintiffs “have proved a substantial likelihood of success on the merits of their claim” that the process for appointing SEC administrative judges is unconstitutional. Ms. May granted a preliminary injunction to Gray Financial Group in August on similar grounds. In both cases, she wrote that the administrative law judge appointment issue “could easily be cured by having the SEC commissioners issue an appointment or preside over the matter themselves.” Hazel Bradford is a reporter at sister publication Pensions & Investments.