The Securities and Exchange Commission is fending off a flurry of legal challenges to its in-house court system, which has become a key cog in its enforcement strategy but has drawn mounting criticism, the Wall Street Journal reported today. The agency is deploying a variety of countermeasures to fight at least seven cases brought by defendants around the country. The expanding effort prompted one federal judge last week to say the agency appears to be in “a little bit of chaos right now.” The cases are forcing the SEC to defend the growing use of its five administrative-law judges, to whom it sends hundreds of cases a year. The agency has been directing more cases to its internal courts since the Dodd-Frank financial-reform law granted it more latitude to do so. The SEC says the system is faster and more efficient than federal courts. Critics have said the process unfairly denies defendants important protections afforded by the federal courts. A federal judge in Atlanta this month said in a ruling that the SEC in-house tribunal was “likely unconstitutional.” She ordered a temporary halt to the SEC case under review, ahead of a final decision on whether to block it permanently.
