SEC Investigations and Enforcement: Navigating Administrative Proceedings

This practice note covers the SEC’s use of administrative proceedings as an enforcement forum and explains how those proceedings differ from civil actions in federal district court. It begins by comparing the two venues, emphasizing differences in adjudicator, procedural rules, fact-finding, discovery, and appellate review. It then addresses the major constitutional challenges to SEC administrative proceedings, focusing on the Supreme Court’s decisions in Lucia, Axon, and Jarkesy, as well as the pending implications of Lemelson. In particular, the document examines Appointments Clause issues, jury-trial rights under the Seventh Amendment, possible nondelegation and removal-power objections, and broader unresolved questions about the SEC’s authority to continue using administrative forums in certain categories of cases.

The practice note also explains the SEC’s current, more limited use of administrative proceedings after Jarkesy, especially for matters not centered on fraud claims seeking civil penalties. It outlines how an administrative proceeding is initiated through an Order Instituting Proceedings and then distinguishes between settled and litigated matters. On settlements, it discusses timing, negotiation dynamics, the benefits and tradeoffs of resolving matters administratively, and the significance of the SEC’s “neither admit nor deny” formulation, including related First Amendment challenges and standard non-negotiable consent terms. On litigated proceedings, it describes the governing Rules of Practice, filing and service requirements, prehearing conferences, answers, motions, document production, limited discovery, summary disposition, hearings, burdens of proof, post-hearing briefing, ALJ initial decisions, and Commission review.

Finally, the practice note summarizes the forms of relief the SEC may obtain in administrative proceedings and the avenues for review after a final decision. It discusses final orders imposing monetary remedies, cease-and-desist relief, censures, bars, suspensions, registration sanctions, undertakings, and professional practice bars. It then explains post-decision judicial review in the federal courts of appeals and closes with a discussion of the Equal Access to Justice Act, including when a prevailing respondent may seek attorneys’ fees and expenses, the eligibility limits, filing requirements, and the SEC’s defenses to such fee applications.