The next constitutional challenge to the SEC's administrative proceedings process may be the most high-profile one to date. This week, the SEC confirmed that after an over two-year holding pattern, it intends to move forward with its civil AP against SAC Capital founder Steven A. Cohen. Cohen's attorney, David Boies, told the WSJ that Cohen intends to mount a constitutional challenge in federal court to the AP, and "would have filed that last week except for the settlement discussions that had been ongoing.”

According to the WSJ, the SEC now plans to "pare down" its case, which seeks a lifetime ban on Cohen managing outside money, to reflect the fact that one of the insider trading convictions of an employee Cohen allegedly failed to supervise (Michael Steinberg) has now been dropped. According to Bloomberg, Cohen may seek to bring that bar down to no more than three years. The SEC's amended case will now reportedly focus on Cohen's failure to supervise Mathew Martoma, another SAC employee whose conviction remains intact.

As I discussed here, federal district courts have split on the issue of whether they have subject matter jurisdiction over challenges to the constitutionality of the SEC's APs. Two circuit courts -- the Seventh Circuit and the D.C. Circuit -- have held that federal courts do not have such jurisdiction and both the Eleventh Circuit and Second Circuit have agreed to decide pending cases that raise the issue. 

According to a November 12, 2015 letter (via the WSJ) the SEC filed with the court in Raymond J. Lucia Companies, Inc., et al. v. SEC (No. 15-1345), the SEC is aware of no fewer than 30 cases in which its use of Administrative Law Judges in APs has been challenged as being in violation of the Appointments Clause of the U.S. Constitution. 

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