While not directly acknowledging the criticism its in-house courts have received over the past year, the Securities and Exchange Commission (“SEC”) yesterday adopted final amendments to the rules of practice governing its administrative proceedings that were initially proposed in September 2015. Among other things, these amendments:
- Extend the potential length of the prehearing period from the current four months to a maximum of 10 months for the cases designated for the longest timelines;
- Allow parties in the cases designated for the longest timelines the right to notice three depositions per side in single-respondent cases and five depositions per side in multi-respondent cases, and to request an additional two depositions;
- Clarify the types of dispositive motions that may be filed at various stages of proceedings and the applicable procedures and legal standards for the motions; and
- Make additional clarifying and conforming changes to other rules, including rules regarding the admissibility of certain types of evidence, expert disclosures and reports, the requirements for the contents of an answer, and procedures for appeals.
According to the adopting release, the amendments will become effective 60 days after publication in the Federal Register and will apply to all proceedings initiated on or after that date as well as to pending matters based on the phase of the particular proceeding. The full text of the amended rules can be found at https://www.sec.gov/rules/final/2016/34-78319.pdf.
These amendments, however, are unlikely to quell critics of the SEC’s in-house courts who to date have been rebuffed by appellate courts in seeking to have their constitutional challenges heard as an initial matter by federal district courts rather than by the SEC. The D.C. Circuit is the next appellate court slotted to weigh-in on the constitutionality issue in a decision that could be the last word on the subject for some time given that the Supreme Court has thus far declined to review the earlier appellate decisions.
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