The Supreme Court ruled on Thursday that the U.S. Securities and Exchange Commission (SEC)’s use of in-house proceedings to impose civil penalties for securities fraud violates the Seventh Amendment’s right to a jury trial. The case arose from the SEC’s action against George Jarkesy Jr. and his firm, Patriot28 LLC, for alleged securities fraud. The SEC opted to adjudicate the matter internally, leading to a $300,000 penalty against Jarkesy and Patriot28. The Fifth Circuit vacated the securities regulator’s order, stating that adjudicating such cases in-house infringes on the Seventh Amendment right to a jury trial.
Supreme Court Rules SEC In-House Penalty Proceedings Violate Seventh Amendment
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The Supreme Court upheld this decision, emphasizing that when the SEC seeks civil penalties for securities fraud, the Seventh Amendment entitles defendants to a jury trial. This ruling challenges the SEC’s ability to bypass federal courts and jury trials in favor of its own administrative proceedings. The court noted that such internal proceedings historically belong before an independent judge and jury, particularly for civil penalty suits akin to common law fraud. The ruling underscores the importance of maintaining traditional judicial processes and safeguarding constitutional rights in regulatory enforcement actions.
