United States: Leveling The Playing Field Or Protecting Its Turf?

Last Updated: October 12 2015
Article by Michael J. Rivera and Joanna P. Breslow Boyd

Facing mounting legal challenges to its use of administrative proceedings on a wide variety of enforcement matters, the SEC announced proposed amendments to rules governing its administrative proceedings. The amendments address nearly every stage of the administrative hearing process, with the most notable changes proposed for the rules governing pre-hearing discovery, the duration of proceedings, and electronic filing and service. While SEC Chair Mary Jo White couched the amendments as designed to "modernize" administrative proceedings, this move is widely perceived as an attempt to assuage criticism directed at the Commission's recent increased use of this forum.

Since the Dodd-Frank Act in 2010 authorized the SEC to pursue more cases administratively, the Commission has significantly increased its filing of administrative enforcement actions, in lieu of litigating in federal court. The proposed amendments address major criticisms levied by defense counsel, and even some judges, that such proceedings are unfair to defendants. While these rule changes (if adopted) could level the playing field somewhat for defendants, this action arguably aims to shield from legal challenges the SEC's broad use of administrative proceedings, an ongoing and professed strategy of the Commission.

The Proposed Amendments

A major criticism of SEC administrative proceedings has been that they feature significantly less discovery than is available in federal court. For example, the current SEC Rules of Practice for administrative proceedings do not permit parties to seek depositions unless the witness is unable to attend or testify at the hearing. The proposed amendments would provide for three depositions per side in matters with one defendant; in cases with multiple defendants, the defendants would be collectively entitled to depose five persons, as would the Commission. Other proposed amendments would modify certain deposition practices to make them more consistent with the practices required in federal district court cases (as governed by the Federal Rules of Civil Procedure).

The expedited timeline for administrative hearings has been criticized as unfair to defendants. In apparent response to this concern, the SEC proposed extending the amount of time between the date of service of the order instituting the proceeding and the hearing date. For example, under the amended rule, for one type of proceeding, the hearing must begin between four and eight months after the order instituting proceedings (the current rule provides for just four months). The Commission explained that the longer time allotted before the hearing will provide sufficient time for the parties to conduct the increased discovery provided for under the revised rules. Additionally, the amendments would change the deadline for the administrative law judge to file his or her decision – the time limit would start on the date the post-hearing briefing or briefing of dispositive motions has been completed (rather than start on the date of service of the order instituting proceedings). Given the frequent delays that occur during the pre-hearing stage, this change would provide administrative law judges more time to analyze their cases.

Critics have further alleged that administrative proceedings lack transparency to the public. The proposed rules would require parties to file documents through the SEC's website and to serve documents electronically. Filers would also be required to redact sensitive personal information, such as Social Security numbers. Regarding these proposed changes, the SEC stated that it "recognizes the need to ensure that public administrative proceeding records are made available to the public as quickly as possible" and that it "believes that electronic submissions will enhance the transparency of administrative proceedings by providing a quicker way for the Commission to make records available to the public."

The proposed amendments address a broad range of other issues relating to administrative proceedings. For example, the amendments would: (i) outline specific information that must be included in expert witness reports (consistent with the Federal Rules of Civil Procedure); (ii) provide that a stay pending consideration of an offer of settlement also stays the timelines of proceedings under the rules (thereby ensuring that defendants not lose valuable hearing preparation time while attempting to settle the matter); and (iii) simplify the appellate petition by requiring a basic three-page petition that need not assert every possible claim (which would provide petitioners more time to formulate and preserve their arguments on appeal).

Court Challenges to SEC Administrative Proceedings

Multiple lawsuits recently have alleged that the SEC's decision to file an enforcement action administratively (rather than in federal court) violates the defendant's rights to due process and equal protection. Moreover, Judge Jed S. Rakoff of the Southern District of New York vocally criticized this Commission practice, highlighting the limited discovery, the permitted use of hearsay, and the fact that the administrative law judge deciding the case is hired and paid by the SEC.

While most of these lawsuits challenging the SEC have not been successful, defendants recently have achieved positive rulings. Over the summer, two federal judges, Judge Leigh Martin May in Atlanta and Judge Richard M. Berman in Manhattan, issued injunctions on behalf of defendants. In  Hill v. SEC and Duka v. SEC, Judges May and Berman both held that the SEC's method for appointing administrative law judges is "likely unconstitutional." In Tilton v. SEC, the Second Circuit recently placed an administrative proceeding on hold while it heard arguments challenging the SEC's filing of that administrative proceeding against the defendant.

With these cases working their way through the courts, the SEC appears to be readying itself to vigorously defend its broad use of administrative proceedings by altering the proceedings to operate more similarly to traditional federal court cases. Only time will tell whether these and other efforts by the Commission to protect its administrative proceeding "turf" succeed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions