Jarkesy's Impact On Agency Enforcement Proceedings: Potential Implications For The SEC And Beyond

On 27 June 2024, in a ruling much-anticipated by the securities industry and other similarly regulated industries, the Supreme Court (the Court) held in SEC v. Jarkesy that when the Securities and Exchange Commission (SEC) seeks civil penalties against a defendant based on claims of securities fraud, the Seventh Amendment entitles the defendant to a jury trial. This means that provisions of the securities laws that permitted the SEC to compel adjudication of such claims before an administrative tribunal—where there are no juries—violate the Constitution. The SEC must instead file such claims in federal district court.

Although the SEC has increasingly opted to file fraud cases in court over the past several years in response to the many challenges to its administrative proceedings, the effects of Jarkesy on the SEC's ability to drive its enforcement agenda (and enforcement statistics) are potentially significant. Moreover, other federal agencies that utilize