SEC Again Rejects Constitutional Challenges To Administrative Enforcement Proceedings

The Securities and Exchange Commission again rejected constitutional challenges to the use of administrative enforcement proceedings presided over by Administrative Law Judges ("ALJs"). The Commission's September 17, 2015 decision in In the Matter of Timbervest, LLC – the Commission's second ruling on the constitutional issue in the past two weeks – rebuffed arguments that ALJ proceedings such as this one violated the Constitution's Appointments Clause and removal provisions and deprived respondents of equal protection of the laws.

The Commission's opinion arose from an ALJ's initial decision that a registered investment adviser had committed fraud by selling property of one of its clients to another client at a below-market rate and by failing to disclose its conflict of interest in the transaction. The Commissioners affirmed the ALJ's findings that respondents had violated the Investment Advisers Act, although they altered the sanctions imposed. The Commission