On March 9, Daniel Hayes, George Kostolampros and Jared Boone authored “Assessing Ruling On SEC Industry Bars In Post-Jarkesy World” in Law360. The following is an excerpt.
On Jan. 8, the U.S. District Court for the District of Columbia confirmed that the U.S. Supreme Court's 2024 decision in SEC v. Jarkesy, which limited the U.S. Securities and Exchange Commission's use of its administrative forum in certain circumstances, did not eliminate the agency's ability to pursue industry bars through administrative follow-on proceedings.
In Sztrom v. SEC, the court refused to enjoin an SEC administrative action seeking to bar an investment adviser from the securities industry, holding that the proceeding remains permissible notwithstanding recent constitutional restraints placed on the commission's in-house enforcement regime.
Michael and David Sztrom—father and son investment advisers—argued, among other things, that past precedent reflects a "deference to the 'modern administrative state' that cannot be squared with more recent Supreme Court decisions" like the justices' 2024 ruling in Loper Bright Enterprises v. Raimondo.
The district court rejected that argument, concluding that those Supreme Court decisions were distinguishable and did not control the case before it. The court declined to speculate "how the law might change" in the future, emphasizing that it was compelled to follow existing U.S. Court of Appeals for the District of Columbia Circuit precedent.
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