The United States Supreme Court ruled recently that administrative law judges (ALJs) employed by the Securities and Exchange Commission (SEC or Commission) had not been selected in a way that satisfied Constitutional requirements.
Finding that ALJs are “Officers of the United States,” rather than regular federal government employees, the Court held in Lucia v. Securities and Exchange Commission, No. 17-130 (U.S. June 21, 2018), that because the SEC ALJs had been selected by SEC career staff, rather than “the President, a court of law, or a head of department,” as required by Article II of the Constitution, their appointments were invalid.
The immediate impact of the Court’s decision is simply to grant a new administrative merits hearing to Raymond Lucia, who had been accused of violating the Investment Advisers Act. The new hearing must be heard by either the Commission itself, or a properly appointed ALJ.
As a practical matter, however, the ultimate impact of Lucia could be much broader. Many federal agencies, including the Department of Labor, select their ALJs in the same manner as the SEC. Although the Court in Lucia was careful to note that it was dealing only with the circumstances of this particular case, we would expect to see challenges in the future regarding the authority of some agency ALJ’s to adjudicate administrative charges in new or pending cases.
A copy of the Court’s decision in Lucia is available here.
Members of the Center for Workplace Compliance (CWC) can read more here.