Supreme Court Holds ALJ Appointment Procedure at SEC Unconstitutional

The U.S. Supreme Court has resolved a circuit split regarding the constitutionality of administrative law judge (ALJ) appointments, holding that the U.S. Securities and Exchange Commission (SEC) can no longer consider ALJs “employees” exempt from the U.S. Constitution’s Appointments Clause.

In Lucia v. SEC, the Court held that ALJs exercise “significant” authority, “comparable to that of a federal district court judge conducting a bench trial,” and thus are “Officers of the United States” who, under Article II, Section 2, Clause 2 of the Constitution, must be appointed by the President, “Courts of Law,” or “Heads of Departments” rather than SEC staff. The decision overturned a ruling by the U.S. Court of Appeals for the D.C. Circuit concluding that SEC ALJs were employees rather than officers, which conflicted with the U.S. Court of Appeals for the Tenth Circuit’s prior decision in Bandimere v. SEC.