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Clifford Chance

Regulatory Investigations and Financial Crime Insights

Supreme Court decides SEC ALJs are "Officers of the United States" subject to the Constitution's Appointments Clause

On June 21, 2018, the US Supreme Court held in Lucia v. SEC that an administrative law judge (ALJ) of the Securities and Exchange Commission (SEC) is an "Officer of the United States" under the Constitution, and therefore his appointment must satisfy the Appointments Clause before he can hear or decide cases. Accordingly, the Supreme Court reversed the Court of Appeals for the DC Circuit, which had agreed with the Commission that its ALJs are employees rather than officers, and thus not subject to the Appointments Clause.

In doing so, the Supreme Court resolved a recent circuit split on this issue, but also significantly unsettled, at least in the near term, the ability of federal agencies like the Commission to adjudicate cases administratively. Indeed, the SEC has already suspended all administrative proceedings in the wake of the decision, and practitioners before the SEC and other federal agencies would be well advised to examine the Lucia decision to determine whether and how their rights have been affected.