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Bandimere v. United States SEC - 844 F.3d 1168 (10th Cir. 2016)


The Securities and Exchange Commission (SEC) has authority to delegate any of its functions except rule-making to its administrative law judges (ALJs). 15 U.S.C.S. § 78d-1(a). SEC regulations task ALJs with conducting hearings and make them responsible for the fair and orderly conduct of the proceedings. 17 C.F.R. § 200.14. SEC ALJs have the authority to do all things necessary and appropriate to discharge their duties. 17 C.F.R. § 201.111.


In 2012, the Securities and Exchange Commission ("SEC") brought an administrative action against Mr. Bandimere, a Colorado businessperson, alleging he violated various securities laws. An SEC administrative law judge (“ALJ”) presided over a trial-like hearing. The ALJ's initial decision concluded Mr. Bandimere was liable, barred him from the securities industry, ordered him to cease and desist from violating securities laws, imposed civil penalties, and ordered disgorgement.

The SEC reviewed the initial decision and reached a similar result in a separate opinion. During the SEC's review, the agency addressed Mr. Bandimere's argument that the ALJ was an inferior officer who had not been appointed under the Appointments Clause.  The SEC conceded that ALJ had not been constitutionally appointed, but rejected Mr. Bandimere's argument because, in its view, the ALJ was not an inferior officer. 

Mr. Bandimere filed a petition for review with the United States Court of Appeals for the Tenth Circuit under 15 U.S.C. §§ 77i(a) and 78y(a)(1), which allows an aggrieved party to obtain review of an SEC order in any circuit court where the party "resides or has his principal place of business." In his petition, Mr. Bandimere raised his Appointments Clause argument and challenged the SEC's conclusions regarding securities fraud liability and sanctions.


Was the ALJ considered as an inferior officer?




The Court held that an ALJ for the SEC who adjudicated an enforcement action was not constitutionally appointed by the President, a court of law, or the head of a department because the ALJ position was established by law; the duties, salary, and means of appointment of the ALJ were specified by statute; and the ALJ exercised significant discretion. Thus, the ALJ was an inferior officer rather than an employee. The petition was granted, and the opinion was set aside.

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