Abstract

This Article examines the implications of the Supreme Court’s decision in SEC v. Jarkesy for the Securities and Exchange Commission (“SEC” or “Commission”). In Jarkesy, the Court held that Congress cannot assign the adjudication of securities antifraud violations seeking civil penalties to an administrative agency without a jury trial, for such punitive actions involve “private rights.” Although this ruling might suggest a reduction in SEC enforcement actions due to the higher costs of federal jury trials, the SEC had already adjusted its practices following Lucia v. SEC in 2018. The Commission shifted away from using administrative law judges for civil penalties, focusing instead on cases less susceptible to constitutional challenges. Jarkesy presents both immediate and long-term challenges for the SEC. Its direct impact is limited because it affects a type of case the SEC has nearly abandoned. However, it poses significant long-term risks because litigants may attempt to extend its applicability to other enforcement actions, increasing litigation and uncertainty in administrative law. The decision also affects the SEC’s enforcement and settlement practices, potentially hindering its ability to address violations efficiently and serve the public interest. Using a novel dataset, this Article explores these institutional dynamics, analyzing the SEC’s adjudication program and assessing the broader implications of Jarkesy for administrative enforcement.

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