On Monday, May 22, the SEC stayed all its administrative proceedings assigned to an ALJ in which a Respondent has an option for review by the 10th Circuit. (Securities laws provide appellate review of SEC administrative proceedings in the Respondent’s choice of the Circuit for her State of residence or the D.C. Circuit). The stay will remain in place until Supreme Court action on the agency’s expected cert petition in Bandimere or further Commission order.
In Bandimere v. SEC, 844 F. 3d 11689 (10th Cir. 2016), reh’g denied, 2017 WL 1717498 (May 3, 2017)(No. 15-9586), the Tenth Circuit concluded that SEC ALJ’s were “inferior officers” not appointed as required by the Constitution’s Appointments Clause (Art. II, sec. 2) and the Commission’s administrative proceedings therefore were unconstitutional.
Bandimere created a circuit split with the D.C. Circuit’s prior decision in Raymond J. Lucia Cos., Inc. v. SEC, 832 F. 3d 277 (D.C. Cir. 2016), pending rehearing (No. 15-1345). The Lucia panel upheld the SEC’s administrative forum, based on a prior decision affirming the constitutionality of FDIC ALJs, Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000). Last February, the D.C. Circuit granted en banc review.
The Commission’s order came days before the full D.C. Circuit was scheduled to hear oral argument (May 24) in the en banc rehearing of Lucia – consolidated with PHH’s similar challenge to the constitutionality of the appointment of CFPB Director Cordray.