Part I: Introduction

In a 6-3 decision issued on June 27, 2024 in SEC v. Jarkesy, the U.S. Supreme Court curtailed the U.S. Securities and Exchange Commission’s (“SEC”) enforcement authority in recognizing that there is a right to a jury trial in SEC actions alleging securities fraud where civil penalties are sought. Prior to the Jarkesy opinion, the SEC had unfettered discretion to bring securities fraud actions in the forum of its choosing (whether that be in federal court or an SEC administrative proceeding), the choice of which was not required to be disclosed prior to the action being brought. It can no longer forum shop.

The choice of forum can dictate both a defendant’s procedural protections and the available remedies for the SEC. When a case is heard in federal court, a life-tenured, salary-protected Article III judge presides, the litigation is governed by the Federal Rules of Evidence and ordinary rules of discovery, a jury finds the facts depending on the claim, and there is an appellate path should one be necessary and appropriate. Contrarily, when the SEC adjudicates the matter in-house, the Commission or a delegated Administrative Law Judge (“ALJ”) presides acting as both judge and jury; it finds facts, it decides discovery disputes, it determines the scope and form of permissible evidence, and the SEC’s Rules of Practice govern.

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