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SEC Reduces Use of Administrative Courts

According to the Wall Street Journal, the SEC is “quietly” reducing its use of administrative courts for enforcement actions. The article notes that the SEC sent fewer cases to its administrative courts in fiscal year 2015 than in 2014. The decline was mostly driven by a drop in the third and fourth quarters of the fiscal year, with the SEC sending only eleven percent of cases (four of thirty-six) to administrative courts in the fourth quarter. During the same quarter in fiscal year 2014, the SEC sent forty percent of cases to its administrative courts.

The article notes that the change may be due to a “meeting this spring in whichAndrew Ceresney,SEC director of enforcement, told his senior staff it should send contested cases alleging insider trading or accounting fraud to federal court unless there were good reasons to use the SEC judges.” Earlier this year, the Division of Enforcement also released a set of forum selection guidelines to better explain its decision-making process.

The push towards increasing use of administrative courts came after the Dodd-Frank Act expanded the SEC’s authority to pursue penalties in the venue similar to those that it can obtain in federal court. This shift elicited criticism from a broad audience, and the Wall Street Journal published a series of articles highlighting the Commission’s ninety percent success rate in administrative proceedings versus a sixty-nine percent success rate in federal court.