Enforcement Discretion at the SEC

65 Pages Posted: 28 Aug 2015 Last revised: 20 May 2016

David T. Zaring

University of Pennsylvania - Legal Studies Department

Date Written: August 26, 2015

Abstract

The Dodd-Frank Wall Street Reform Act allowed the Securities & Exchange Commission to bring almost any claim that it can file in federal court to its own Administrative Law Judges. The agency has since taken up this power against a panoply of alleged insider traders and other perpetrators of securities fraud. Many targets of SEC ALJ enforcement actions have sued on equal protection, due process, and separation of powers grounds, seeking to require the agency to sue them in court, if at all.

This article evaluates the SEC’s new ALJ policy both qualitatively and quantitatively, offering an in-depth perspective on how formal adjudication – the term for the sort of adjudication over which ALJs preside – works today. It argues that the suits challenging the SEC’s ALJ routing are without merit; agencies have almost absolute discretion as to who and how they prosecute, and administrative proceedings, which have a long history, do not threaten the Constitution. The controversy illuminates instead dueling traditions in the increasingly intertwined doctrines of corporate and administrative law; the corporate bar expects its judges to do equity, agencies, and their adjudicators, are more inclined to privilege procedural regularity.

Keywords: administrative law, securities law, corporate law, constitutional law

Suggested Citation

Zaring, David T., Enforcement Discretion at the SEC (August 26, 2015). Texas Law Review, Vol. 94, No. 3, 2016. Available at SSRN: https://ssrn.com/abstract=2651671

David T. Zaring (Contact Author)

University of Pennsylvania - Legal Studies Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

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