A divided federal appeals court panel in New Orleans has vacated stiff financial penalties imposed on a hedge fund manager by the Securities and Exchange Commission, ruling that he was unconstitutionally denied a jury trial by the agency, the Associated Press reported. This week’s 2-1 ruling by a panel of the 5th U.S. Circuit Court of Appeals said the case against George R. Jarkesy should have been heard in a federal court instead of before one of the SEC’s administrative law judges. It also said Congress unconstitutionally granted the SEC “unfettered authority” to decide whether the case should be tried in a court of law or handled within the executive branch agency. And it said laws shielding the commission’s administrative law judges from being fired by the president are unconstitutional. The ruling, which divided three Republican-appointed judges on the court, could have far-reaching implications on the use of administrative law judges and the power of regulatory agencies. According to the University of Pennsylvania’s Penn Program on Regulation, there are nearly 2,000 administrative law judges employed by 28 federal government agencies.
