Federal agencies are on alert after the Supreme Court affirmed a constitutional right to a jury whenever the Securities Exchange Commission (SEC) seeks a civil fine to punish securities fraud. The court’s decision, SEC v. George R. Jarkesy, 144 S. Ct. 2117 (2024), struck down the SEC’s preferred method of levying fines—administrative hearings—and increased protections to the subjects of SEC investigations. However, the decision will have broad ramifications across the executive branch beyond the SEC. As Justice Sonia Sotomayor noted in dissent, “The constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress.” These broader implications could affect how agencies enforce statutes and provide litigants more opportunities to challenge agency decisions.
Background
Jarkesy started as an unremarkable case involving allegations of garden-variety fraud. The SEC had accused George Jarkesy Jr., and his firm, Patriot28, LLC, of securities fraud for making misleading statements to investors, manipulating asset valuations, and misusing investors’ funds. In total, Jarkesy allegedly misled 100 investors who had invested $24 million in assets.
