Fifth Circuit Court of Appeals Rules SEC Internal Judges Unconstitutional

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On Wednesday, in a 2-1 ruling, the 5th Circuit Court of Appeals determined the Securities and Exchange Commission (SEC) internal judges are unconstitutional because it violates the Seventh Amendment by denying defendants the right to a trial jury.  The ruling was in favor of George Jarkesy and Patriot28 LLC, who sued the SEC in 2011 after the agency imposed a $300,000 fine and other punishments in a securities fraud case.  Bringing defendants before in-house judges allows the agency to “act as both prosecutor and judge,” Judge Jennifer Walker Elrod wrote in the majority opinion.