There has been much written about the problems with the Securities and Exchange Commission adjudicating cases in its own administrative law courts. The SEC launched a proposal to change the rules for the SEC’s administrative proceedings to adjust the tilt of the home-court advantage.
It’s clearly a move to limit the problems with the use of administrative judges. That is running into its own Constitutional challenge. It would seem that the SEC should change the appointment mechanism for its administrative judges. Of course that risks having past decisions overturned.
There is a clear home-court advantage for the SEC. The SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year, a Wall Street Journal analysis found. That’s higher than the 69% success rate in federal court.
The SEC’s proposals include many changes to the SEC’s Rules of Practice:
- Permit parties to take depositions of witnesses as part of discovery
- Require parties in administrative proceedings to submit filings and serve each other electronically, and to redact certain sensitive personal information from those filings
- Hold hearings within four to eight months of an order.
- Allow depositions but the requesting party would be responsible for all fees and expenses for the witness.
- Permit subpoenas to compel a witness to attend a deposition, including one who “testified during an investigation.”
- Reveal details of an expert witness’ upcoming testimony, exhibits to be shown and how much compensation the witness received.
- Permit the division to withhold information on persons who are in settlement negotiations but “who are not respondents in the proceeding at issue.”
I think this a good step in the right direction for the SEC. There is an advantage to using the expertise of the SEC’s administrative judges who focus on the substantive area than a federal judge who handles a broad range of actions. The focus should be on the substance and not the procedural restrictions in the proceedings. The SEC should not have a home court advantage on the procedural side if it thinks it has better substantive decision-making.
Sources:
- SEC Proposes to Amend Rules Governing Administrative Proceedings
- Proposed rule on changes to Administrative Practice
- Proposed rule for electronic submission
- Proposal would amend SEC ALJ procedures, allow more time and expand discovery in IA Watch
- SEC Gives Ground on Judges by Jean Eaglesham in the Wall Street Journal
