SEC Rejects Constitutional Challenge To Administrative Proceeding

The Securities and Exchange Commission joined the raging debate about whether SEC administrative proceedings conducted by administrative law judges ("ALJs") are unconstitutional if the ALJs have not been appointed in accordance with the Appointments Clause of the U.S. Constitution. In a 3-2 decision in In the Matter of Raymond J. Lucia Companies, Inc., the Commission ruled on September 3, 2015 that ALJs are "mere employees" of the Commission – not "inferior officers" of the United States – and are therefore not subject to the Appointments Clause's requirements.

The Commission's ruling arose from an administrative enforcement proceeding against a former registered investment adviser who had been charged with making material misrepresentations to prospective clients. An ALJ had conducted the proceedings and had ruled that the respondents had committed securities fraud. The respondents sought de novo review from the Commission, contending that – among other things –