The Securities and Exchange Commission (SEC) lost some of its power after the Supreme Court issued a ruling Thursday invalidating the agency’s internal system used to pursue civil fraud penalties, a decision that prompted liberal Justice Sonia Sotomayor to read her dissent aloud from the bench, The Hill reported.
The 6-3 decision, with conservatives in the majority, states that the SEC’s in-house administrative courts, which have been the agency’s major tool for enforcement, are unconstitutional. This outcome hurts not just the SEC's regulatory enforcement efforts but potentially those of other federal agencies, the Biden administration warned.
In writing for the majority, Chief Justice John Roberts said that making defendants go through the SEC’s in-house system instead of federal court violates their Seventh Amendment right to a jury trial.
But the court's liberal justices view the decision as part of a broader assault on the federal government's ability to regulate.
"Make no mistake: Today’s decision is a power grab," Sotomayor declared in a rare dissent from the bench.
“Today, for the very first time, this Court holds that Congress violated the Constitution by authorizing a federal agency to adjudicate a statutory right that inheres in the Government in its sovereign capacity, also known as a public right,” Sotomayor said. “According to the majority, the Constitution requires the Government to seek civil penalties for federal securities fraud before a jury in federal court.”
Sotomayor was joined in her dissent by fellow Justice Elena Kagan and Justice Ketanji Brown Jackson.
“Today’s ruling is part of a disconcerting trend: When it comes to the separation of powers, this Court tells the American public and its coordinate branches that it knows best," Sotomayor said.
