A split panel of the United States Court of Appeals for the Tenth Circuit in Bandimere v. SEC ruled that the Securities and Exchange Commission’s use of administrative law judges (“ALJs”) violates the Appointments Clause of the Constitution.
Disagreeing with the D.C. Circuit’s finding that the same proceedings were constitutional, the Tenth Circuit set aside an SEC order imposing sanctions for securities laws violations, raising significant questions about the future of SEC claims brought before ALJs rather than in federal courts, as well as prior adjudications. While Bandimere will not be the last word on the constitutionality of these administrative proceedings, it puts a spotlight on the SEC’s enforcement powers as the incoming Presidential administration considers its appointments to and priorities for the Commission.