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Investment Adviser Drops Constitutional Challenge to SEC Judges

by Janessa Lee

Investment Adviser Drops Lawsuit Challenging SEC’s In-House Judges

An investment adviser, Christopher Gibson, has recently dropped his lawsuit challenging the constitutional validity of the Securities and Exchange Commission’s (SEC) in-house judges. In a joint filing with the US District Court for the Northern District of Georgia, Gibson and the SEC indicated that the case was being dismissed without prejudice.

Gibson’s lawsuit, which was brought in April, argued that the SEC’s in-house judges were improperly appointed, raising concerns about their impartiality and the constitutionality of the agency’s enforcement actions. This case gained attention in the legal and financial community as it questioned the legitimacy of the SEC’s internal disciplinary process.

The timing of Gibson’s lawsuit was significant, coming soon after the US Supreme Court’s decision in Axon Enterprise v. FTC. This landmark ruling allowed subjects of SEC enforcement actions to bring constitutional claims against the agency in federal court without being compelled to go through the SEC’s internal administrative proceedings.

The Supreme Court’s decision in Axon Enterprise v. FTC fueled a wave of constitutional challenges against federal agencies, including the SEC. This decision represented a significant victory for Gibson and others seeking to challenge the SEC’s in-house judges on constitutional grounds. It offered an alternative route for defendants to present their constitutional arguments in a more independent judicial forum.

However, it seems that Gibson’s dismissal of the lawsuit without prejudice suggests that he may be exploring other avenues or strategizing a different approach to challenging the SEC’s in-house judges. Dismissing the case without prejudice means that Gibson can potentially refile the lawsuit at a later date, perhaps after considering the outcomes of similar ongoing cases challenging the SEC’s administrative law judges.

The issue of the SEC’s in-house judges has long been a subject of controversy and debate. Critics argue that these judges, who are appointed by the SEC itself, lack independence and might favor the agency in their rulings. Proponents of the system contend that the judges possess expertise in financial matters and can provide efficient and effective resolution of enforcement actions.

The dismissal of Gibson’s lawsuit does not, in any way, invalidate the underlying concerns that prompted the case. It highlights the complexity of challenging the SEC’s in-house judges and indicates that the battle for more transparent and impartial administrative proceedings will likely continue. With multiple cases challenging the appointment process of administrative law judges currently ongoing, the issue is far from resolved.

As the debate surrounding the constitutional status of the SEC’s in-house judges continues, it will be interesting to see how future legal battles unfold. The outcome of these cases could have significant implications for the SEC’s enforcement actions and the overall credibility of the agency. Investors and market participants will closely monitor these developments, hoping for a fair and impartial resolution of regulatory disputes within the financial industry.

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