A federal court of appeals in the District of Columbia upheld the constitutionality of the Securities and Exchange Commission’s administrative judges to hear SEC-initiated enforcement proceedings. The petitioners in the action, Raymond J. Lucia Companies Inc. and Raymond J. Lucia, had argued that hearings before such administrative judges violated the US Constitution because the administrative judges hearing and deciding such actions were not appointed by the President of the United States. (Click here for a detailed discussion of the legal basis for this position in the article, “Georgia Federal Court Holds SEC Administrative Proceeding Unconstitutional “ in the June 14, 2015 edition of Bridging the Week.) However, the appellate court rejected this argument, claiming that, because the SEC retains ultimate discretion to review an ALJ’s initial decision on its own initiative or upon a petition for review by a party or aggrieved person, only the SEC’s own order represents the final determination in an administrative proceeding. Since the US President appropriately appoints SEC commissioners, SEC administrative hearings are lawful, said the appellate court. Following an administrative hearing, the SEC previously imposed sanctions on the petitioners for violating its rules against misleading advertising by investment advisers (click here to access the relevant decision). Generally, the SEC may bring enforcement actions in an administrative tribunal or in a federal court.