Tuesday, November 28, 2023

Securities and Exchange Commission v. Jarkesy

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The murder, which shocked the country, took place in 2020 after the teacher had shown his pupils caricatures of the Prophet Muhammad in a class on freedom of expression.

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SCOTUSblog reports on the upcoming Securities and Exchange Commission v. Jarkesy case. It strikes at the heart of the bureaucratic world and the assignment of legislative and judicial functions to unelected and unreachable appointees.

A summary of a summary:

The case stems from an administrative proceeding that the SEC brought against hedge fund founder and investment adviser George Jarkesy in 2013. The SEC’s in-house enforcement proceedings eventually found that Jarkesy and his firm had committed securities fraud, and it ordered them to pay $300,000 in fines and to repay nearly $700,000.

The government’s view in this case is that the Constitution affords Congress a broad authority to create new obligations by statute, and that because those statutory obligations were unknown to the common law, they are public rights that Congress can assign to an administrative tribunal without a jury. It should be enough to validate the congressional scheme that the features of the securities cause of action here do not match the elements of the 18th-century cause of action for fraud.

In contrast, Jarkesy broadly calls for the eradication of the public rights doctrine, arguing that one of the main “catalysts” and “flashpoints” for the American Revolution was the British crown’s practice of trying claims for statutory penalties in admiralty courts without a jury.

The second question is whether Congress can delegate to the SEC the power to decide whether a case should be pursued as an administrative proceeding or as a civil enforcement action – that is, within the agency or in a federal district court.

The third question in the case is whether the Constitution allows Congress to give the SEC’s administrative law judges protection from removal.

This is culled from the article. Then this summary:

"The summary above should make it clear that a complete affirmance of the 5th Circuit’s decision probably would be the most important administrative law decision of the last half-century. That suggests of course a pretty strong likelihood that several of the justices will be reluctant to go nearly so far. The argument should give a lot of insight as to which of the three challenges is likely to survive."

And this opening line in an article in the Atlantic on the case: 
"This Wednesday, the Supreme Court will hear a case that poses the most direct challenge yet to the legitimacy of the modern federal government."

This looks like a big deal. And it should be contentious. Jarkesy is a conservative talk show host and superficially looks guilty. But the very point of this country is that it was built on free principles and processes, regardless of how unattractive its victims might be.

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