On August 22, 2018, the Securities and Exchange Commission (“SEC”) announced that it will rehear over fifty cases pending before administrative law judges (“ALJs”) that were stayed following the U.S. Supreme Court’s decision in Lucia v. SEC, 138 S. Ct. 2044 (2018), which held that the SEC’s process for appointing ALJs was unconstitutional. See Order, In re: Pending Administrative Proceedings (Aug. 22, 2018) (the “Order”). In Lucia, the Court held that ALJs hired by the SEC are “inferior officers” of the United States and are thus subject to the Constitution’s Appointments Clause, which states that inferior officers may only be appointed by the President, a court, or a department head. Since the SEC’s ALJs were not appointed in such a manner, the Court held that the respondent in Lucia was entitled to a new hearing before a properly appointed official. See Shearman & Sterling LLP Need To Know Weekly, United States Supreme Court Reverses and Remands SEC Administrative Proceeding - Finding That SEC Administrative Law Judges are Subject to the Appointments Clause of the Constitution and Were Not Properly Appointed by the SEC(June 26, 2018)

The Order states that, unless the parties expressly agree to alternative proceedings, any proceeding currently pending before an ALJ or the SEC will be afforded the opportunity for a new hearing before an ALJ who previously has not participated in the matter, and that all prior opinions and pending deadlines related to those matters are thereby vacated. Id. at 1-2. In the rehearings, the newly-assigned ALJs “shall exercise the full powers conferred … and shall not give weight to or otherwise presume the correctness of any prior opinions, orders, or rulings issued in the matter.” Id. at 2.

The Order appears to be intended to front-load the extra effort the SEC will have to make to comply with the Supreme Court’s June ruling: instead of bracing for years of challenges to this set of pending proceedings, the SEC will clear the set at once by starting them over.

In re: Pending Administrative Proceedings