The U.S. Securities and Exchange Commission’s enforcement program has grown and morphed since it was created. Perhaps the most recent example of its evolution is its increasing use of the administrative forum for litigating enforcement actions over its more traditional choice, federal district court. This development has fast captured the attention of respondents and judges, among others. In a recent opinion, U.S. District Judge Jed S. Rakoff mused: “[T]he Court of Appeals invites the SEC to avoid even the extremely modest review it leaves to the district court by proceeding on a solely administrative basis … . One might wonder: from where does the constitutional warrant for such unchecked and unbalanced administrative power derive?”1 As the SEC continues to file more complex cases in its administrative forum, Rakoff’s words seem prescient of the legal and public policy battles to come.

SEC Administrative Proceedings

Traditionally, complex securities enforcement cases were rarely litigated in administrative proceedings. As a result, many defense attorneys and their clients remain unfamiliar with the SEC’s administrative litigation process and unsure about the attendant legal and strategic considerations. The key stages of this process, governed by the SEC’s Rules of Practice, are explained below.2

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