Constitutional Challenge to SEC Judge Must Get In-House Review

An accountant facing an SEC enforcement action can’t bring a constitutional challenge against the agency in federal court until its in-house proceeding ends, the Fifth Circuit said Tuesday.

The Securities and Exchange Commission began an administrative proceeding against Michelle Cochran, a CPA, after she allegedly failed to comply with auditing standards under federal securities law. Cochran sued in federal district court, arguing that the agency’s administrative law judges judges enjoy unconstitutional protections against removal.

But “the statutory review scheme"—which requires in-house defendants to appeal within the agency before turning to federal courts—"is the exclusive path for asserting a constitutional challenge ...