The constitutionality of the Securities and Exchange Commission’s (SEC) in-house court system is being called into question, based on the judge appointment process. This comes at a time when the SEC is placing greater reliance on internal courts in order to more expediently process cases that would be held up in the federal court system. The decades old in-house court was granted expanded authority to hear its own cases under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
These accusations could have far reaching impacts. Charges have been brought by several defendants, requesting a halt to more than 100 disputed cases including insider trading and fraud allegations. If the appointment of the five administrative-law judges is deemed unconstitutional, then hundreds of past rulings would come under heavy scrutiny. The SEC is working diligently to defend the in-house court system and the fairness of its rulings; however, this effort will face numerous challenges as the cases encompass a multitude of legal issues.