In recent months, defendants in multiple SEC cases that the agency has brought as administrative proceedings have shot back as plaintiffs in federal court claiming that the SEC’s use of these “APs” is unconstitutional. On December 11, 2014, the SEC prevailed in the first of these challenges to be decided by a federal court in the case of Chau v. SEC.
In the Chau case, U.S. Judge Lewis A. Kaplan of the SDNY ruled that the federal court did not have subject matter jurisdiction to consider the claim that the SEC’s choice to pursue the case at issue administratively (as opposed to in federal court) deprived the plaintiffs of their rights to due process and equal protection of law. Judge Kaplan noted that “Congress has provided the SEC with two tracks on which it may litigate certain cases. Which of those paths to choose is a matter of enforcement policy squarely within the SEC’s province.”
