The SEC announced this week that it would stay all administrative proceedings involving certain provisions of the Securities Act, the Securities Exchange Act, and the Investment Company Act in the wake of the Tenth Circuit’s decision in Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016).
In Bandimere, the Tenth Circuit held that the SEC’s administrative law judges (“ALJs”) were “inferior officers” who are subject to the Appointments Clause of the U.S. Constitution. The appeals court granted the petition for review on constitutional grounds because the ALJ was not constitutionally appointed and his duties involved the exercise of significant authority. The court denied the petition for rehearing en banc on May 3, 2017.
The SEC explained that “[i]n light of the U.S. Court of Appeals for the Tenth Circuit’s recent decision denying rehearing en banc in Bandimere v. SEC, we find it prudent to stay all administrative proceedings assigned to an administrative law judge in which a respondent has the option to seek review in the Tenth Circuit of a final order of the Commission.”
As we previously reported, the constitutionality of the SEC’s use of ALJs has been the subject of divergent court decisions, with the D.C. Circuit upholding their use in an August decision. The D.C. Circuit, however, subsequently vacated that decision in February and held oral argument on rehearing en banc on May 24.