A federal appeals court ruled Wednesday that the Securities and Exchange Commission's internal judges violate a defendant’s constitutional rights by denying them their right to a jury trial.
In a 2-1 opinion, the U.S. Court of Appeals for the Fifth Circuit ruled that the SEC violated hedge fund manager George Jarkesy Jr and investment advisor Patriot28 LLC's Seventh Amendment right because they "act as both prosecutor and judge.”
According to Bloomberg, the SEC accused Jarkesy and Patriot28 of committing securities fraud.
In the ruling, Judge Jennifer Walker Elrod also declared that Congress unconstitutionally authorized legislative power to the SEC to act with delegated authority.
The New York Times reported that the ruling comes as the U.S. Supreme Court agreed to a hear a similar case involving the SEC’s administrative powers.