It will assuredly not quell controversy surrounding the Securities and Exchange Commission’s use of in-house judicial proceedings, but an opinion this week by the U.S. Court of Appeals for the D.C. Circuit is the first by an appellate court to uphold the legality of those administrative proceedings.

The ruling quashes an appeal brought before it on the grounds that the Commission’s in-house judges are unconstitutional because they were not appointed by the President and confirmed by Congress.

In September 2012, the SEC charged investment adviser Ray Lucia, Sr., a nationally syndicated radio personality and financial advice author, with “spreading misleading information” about an investment strategy he and his company touted at a series of investment seminars. An in-house judge upheld those charges, as did an appeal brought before SEC commissioners. Lucia was barred from the industry and fined $300,000.

The SEC’s Division of Enforcement had alleged that Lucia and his company promoted his “Buckets of Money” wealth management strategy, purporting that it would provide inflation-adjusted income to retirees while protecting and even increasing their retirement savings. It claims that Lucia, despite public claims to the contrary, “performed scant, if any, actual backtesting of the strategy.

Backtesting is the process of evaluating a strategy or model by applying it to historical data. Lucia admitted during the SEC’s investigation that the only testing his firm actually performed were some calculations made in the late 1990s (copies of which no longer exist) and two two-page spreadsheets.

In October 2015, Republican commissioners Dan Gallager and Michael Piwowar dissented from the enforcement action when it was brought before them on appeal.  “Unfortunately, the Commission majority has taken a relatively straightforward set of facts and needlessly engaged in ‘rulemaking by opinion,’” they wrote, adding that the majority opinion “creates from whole cloth specific requirements for advertisements that include the word ‘backtest.”

They added: “The respondents have raised important issues with respect to whether the administrative law judge overseeing the proceeding was appointed in a manner consistent with the Appointments Clause of the Constitution. Even though the Commission is free to express its views on Constitutional issues, we recognize and believe it is appropriate that… federal judges ultimately resolve this issue.”

Lucia cited the Appointments Clause in his legal challenge, arguing that the SEC’s administrative law judges were not nominated by the President, nor were they confirmed with the “advice and consent” of the Senate.

The D.C. Circuit ruling dismissed the constitutional challenge, opining that the SEC judges were, in essence, employees of the agency rather than “inferior officers” or an independent judiciary function. Final decisions and actions still rest with politically accountable commissioners, it said.

The opinion cites a 1961 reorganization plan for the Federal Trade Commission, drafted by President John F. Kennedy. Its goal was to provide “for greater flexibility in the handling of the business before the Commission,” and “relieve the Commissioners from the necessity of dealing with many matters of lesser importance and thus conserve their time for the consideration of major matters of policy and planning.” The SEC, it said, has similar powers of delegation with administrative proceedings and retains the ability to accept, reject, or alter any ruling upon appeal.