Supreme Court limits power of SEC to unilaterally enforce financial fraud regulations

CNN —

The Supreme Court on Thursday limited the power of the Securities and Exchange Commission to enforce security fraud violations, siding with a hedge fund manager and former conservative radio show host who saidhe was entitled to a jury trial rather than an in-house review by the agency.

The decision could have enormous consequences for the SEC and other agencies, requiring them to pursue violations in federal court rather than with a more streamlined internal review. That could make it harder to police fraud and protect investors while adding to federal court backlogs.

Chief Justice John Roberts wrote the decision for a 6-3 majority, with the court’s three liberals in dissent.

The Supreme Court declined to address more existential challenges to the agency’s enforcement structure, including claims that could have severely undermined the government’s ability to use in-house administrative law judges or protect them from the political whims of a president.

“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” Roberts wrote. “Rather than recognize that right,” the chief wrote that his dissenting colleagues would “permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the executive branch.”

“That is the very opposite of the separation of powers that the Constitution demands,” he wrote.

Sotomayor reads dissent from the bench

A dissent by Justice Sonia Sotomayor, signed by the court’s two other liberals, called Thursday’s ruling a “power grab” that “upends longstanding precedent and the established practice of its coequal partners in our tripartite system of government.”

She said “momentous consequences that flow