The SEC’s increased use of administrative proceedings in enforcement actions: background, controversies, and future outlook

Abstract

Purpose To explain the background, controversy and possible future developments related to the US Securities and Exchange Commission’s (SEC’s) increased use of administrative proceedings (APs), rather than court actions, in bringing enforcement matters. Design/methodology/approach Discusses the SEC’s historic forum selection process, the home court advantage APs may give to the SEC, changes the SEC has proposed to the Rules of Practice governing APs, arguments challenging the constitutionality of APs, a jurisdictional hurdle faced by respondents challenging APs before federal courts, and possible future developments. Findings Critics consider the SEC’s expanded use of APs to be procedurally biased, unconstitutional, and unfairly advantageous to the SEC. In response, the SEC has offered guidance explaining its forum selection process, proposed procedural changes, and its belief that its systems are fair. Originality/value Practical guidance from experienced financial services and securities litigation lawyers.