The U.S. Court of Appeals for the Fifth Circuit (Court) recently decided Jarkesy v. SEC
. The Court’s decision has deep ramifications for the SEC that build off of other recent decisions reasserting constitutional limitations on the SEC’s authority. Specifically, the Court declared that SEC enforcement proceedings before an administrative law judge (ALJ) violate the Seventh Amendment’s jury-trial guarantee, that Congress unconstitutionally delegated legislative authority to the SEC when it authorized the SEC to pursue administrative enforcement proceedings and that statutory restrictions on the removal of SEC ALJs violate the Constitution. The ruling in Jarkesy
is significant – it could reshape the SEC’s enforcement priorities and opens the door to a number of additional strategic considerations for defendants targeted by the SEC. In a guest article, MoloLamken attorneys Eric R. Nitz and Allison Mileo Gorsuch summarize the case, identify the key takeaways for fund managers and forecast the decision’s impact on future SEC enforcement efforts against fund managers. See “Present and Former SEC Officials Discuss the Commission’s Latest Examination and Enforcement Tactics and Priorities
” (Jun. 21, 2022); and “Problems the SEC Looks for in Private Fund Exams, Recent Trends in Examination Techniques and Tips for Addressing Deficiencies
” (Nov. 9, 2021).