Appeals Court Undercuts Agency Enforcement in SEC Fraud Case

The Fifth Circuit fired a double-barreled blast at federal agency enforcement powers with its ruling that the SEC violated a hedge fund manager’s right to a jury trial by putting his case before an in-house judge.

The U.S. Court of Appeals for the Fifth Circuit’s decision May 18 broadened the legal test for determining which agency actions are barred from being decided by administrative law judges, potentially limiting government litigation strategy, sidelining expert in-house judges, and hamstringing enforcement altogether for agencies that can’t go directly to court, legal scholars said.

The court also blocked the US Securities and Exchange Commission’s ...