Photographer: Joshua Roberts/Bloomberg

Trump Administration Switches Sides on Challenge to SEC Judges

  • Administration will no longer defend how they are appointed
  • Filing urges Supreme Court to hear investment adviser’s appeal

The Trump administration switched sides in a clash that could upend the Securities and Exchange Commission’s hearing process, telling the U.S. Supreme Court that agency judges were appointed in violation of the Constitution.

In a legal filing Wednesday, the administration said it would no longer defend a federal appeals court decision that upheld the commission’s use of in-house judges.

U.S. Solicitor General Noel Francisco said SEC judges are "officers," rather than employees, making them subject to constitutional requirements about how they can be appointed. Francisco urged the high court to hear an appeal from Raymond Lucia, an investment adviser fighting a finding that he misled prospective clients.

The appointment of the judge who handled Lucia’s case "did not conform" to the Constitution’s requirements, Francisco said in the filing. He said the court should appoint an outside lawyer to defend the lower court ruling.

In urging the high court to take the case, Francisco said the legal uncertainty is stalling the SEC’s enforcement of the nation’s securities laws. He also said the issue could affect other federal agencies.

Under the Constitution, officers must be appointed by the president, the head of a department or a court. The SEC has five administrative judges who are appointed by the chief administrative judge, Francisco said.

Critics complain that the use of in-house judges gives the SEC an unfair advantage.

The case is Lucia v. SEC, 17-130.

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