See Simple Rules for Jarkesy v. SEC in a Complex Administrative World “The Fifth Circuit got it right. Private rights include life, liberty, and property, as enumerated in the Due Process of Law Clause. And deprivations thereof must receive traditional Article III judicial process, subject to limited exceptions. Indeed, a deprivation of private rights requires an exercise of the judicial power.” re US Supreme Court limiting unlawful powers of SEC. “Imagine that you are an investment advisor trying to comply with the vast and confusing morass of federal and state securities laws. Despite your best efforts to follow the law, the Securities and Exchange Commission’s (SEC or Commission) enforcement division investigates your actions after receiving a complaint from a disgruntled investor. After the investigation, the enforcement division presents its findings to the Commission, which institutes an administrative hearing against you. An administrative law judge (ALJ), an agency employee who works for the SEC, will preside over your hearing, and the Commission will hear any appeal. The SEC will prosecute you, judge the case, and decide any appeal. You do not like the odds.

You file suit in federal court to challenge the constitutionality of the adjudicative process. The SEC moves to dismiss, arguing that the federal court has no jurisdiction to hear the claim. The SEC argues it has the exclusive power to resolve these constitutional issues and federal courts can only consider the constitutionality of the agency’s structure after the SEC’s adjudicative process is complete. This means that you must go through the unconstitutional process, lose on the merits, and appeal twice. Only during the second appeal can you raise the constitutional challenges in a forum that not only has the power to consider the challenges but is a far better forum for resolving them. Yet, even if you win, you win nothing; the unconstitutional hearing has already taken place. The egg cannot be unscrambled.”