US Supreme Court faults SEC's use of in-house judges in latest curbs on agency powers

The U.S. Supreme Court rejected on Thursday the Securities and Exchange Commission's in-house enforcement of laws protecting investors against securities fraud, dealing a blow to the agency's powers in a ruling that could reverberate through other federal regulators.

The decision - a setback for President Joe Biden's administration - upheld a lower court's decision siding with George Jarkesy, a Texas-based hedge fund manager who contested the legality of the SEC's actions against him after the agency determined he had committed securities fraud.

It was a 6-3 decision authored by Chief Justice John Roberts, with the court's conservative justices in the majority and the liberal justices dissenting. The court ruled that agency proceedings seeking penalties for fraud that are handled by SEC itself instead of in federal court violate the U.S. Constitution's Seventh Amendment right to a jury trial.

"The SEC's antifraud provisions replicate common law fraud, and it is well established that common law claims must be heard by a jury," Roberts wrote.