The Supreme Court strips the SEC of a critical enforcement tool in fraud cases

WASHINGTON (AP) — The Supreme Court on Thursday stripped the Securities and Exchange Commission of a major tool in fighting securities fraud in a decision that also could have far-reaching effects on other regulatory agencies.

The justices ruled in a 6-3 vote that people accused of fraud by the SEC, which regulates securities markets, have the right to a jury trial in federal court. The in-house proceedings the SEC has used in some civil fraud complaints, including against Houston hedge fund manager George Jarkesy, violate the Constitution, the court said.

“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” Chief Justice John Roberts wrote for the court’s conservative majority.

Justice Sonia Sotomayor, who read from her dissent in the courtroom, said that “litigants who seek to dismantle the administrative state” would rejoice in the decision.

Federal agencies that oversee safety in mines and other workplaces are among many that can only impose civil penalties in in-house, administrative proceedings, Sotomayor wrote, joined by Justices Ketanji Brown Jackson and Elena Kagan.

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