Justices wrestle with SEC judges case
Ex-financial adviser challenges hiring in administrative posts
WASHINGTON — The Supreme Court wrestled Monday with a case brought by a former financial adviser known for his “Buckets of Money” strategy who is challenging the appointment of the administrative law judge who ruled against him.
The case involves the Securities and Exchange Commission’s administrative law judges, who conduct hearings on alleged securities law violations and issue initial decisions. The federal government employs administrative law judges in more than 30 agencies, however, giving the case the potential to have a broader impact.
During arguments Monday, Justice Anthony Kennedy wanted to know “what effect, if any” the case would have on administrative law judges in other agencies. Attorney Mark Perry suggested that the court’s decision could effect some 150 administrative law judges in 25 agencies.
The question the justices are being asked to decide is whether the SEC’s administrative law judges are SEC employees or instead “inferior officers” of the United States. The answer is important in determining who can appoint them to their positions.
The case before the Supreme Court involves former financial adviser Raymond Lucia, who as a radio show host, author and seminar leader promoted a retirement strategy he called “Buckets of Money.” Lucia’s strategy was that in retirement investors should first sell safer investments, giving riskier investments time to grow.
The SEC charged Lucia in 2012 with violating federal law and SEC rules, saying he used misleading slides in a free presentation to potential clients. One of the SEC’s five administrative law judges conducted a nine-day hearing and ultimately found against Lucia, fining him and his company $300,000 and barring him from working as an investment adviser.
Lucia challenged the decision and argued that the administrative law judge who heard his case was improperly appointed. He says that because the SEC’s administrative law judges exercise significant authority under federal law, they are inferior officers of the United States under the Constitution’s Appointments Clause. Inferior officers have to be appointed either by the president, courts or heads of departments. Lucia says that means in his case that the administrative law judge should have been appointed by the commission itself, not chosen by the commission’s chief administrative law judge.
Breaking with the Obama administration, the Trump administration is siding with Lucia. And last year, to ward off new legal challenges, the SEC ratified the appointment of its administrative law judges, a move it said resolved any concerns they weren’t properly appointed.
Because the Trump administration is siding with Lucia, Supreme Court-appointed attorney Anton Metlitsky argued the opposite view Monday. Metilsky said the SEC’s administrative law judges don’t count as inferior officers because they don’t exercise significant authority, pointing out that every decision they make can be fully reviewed by the commission.