The Due Process Restoration Act of 2015 Would Kill Administrative Adjudication At The SECnd

Rep. Scott Garrett has introduced a bill that would make administrative proceedings optional for all defendants, and also change the standard of proof for them.  It would basically kill things for SEC ALJs, and the enforcement division’s new policy of directing cases their way (with one caveat that I bring up below).  The bill’s introduction suggests that not everyone is happy with the agency’s attempt to hold onto its discretion to bring enforcement actions administratively or judicially by lengthening the time for proceedings to eight months (from four), and permitting a smidgen of discovery.

Check out the language of the bill:

“(a) Termination Of Administrative Proceeding.—In the case of any person who is a party to a proceeding brought by the Commission under a securities law, to which section 554 of title 5, United States Code, applies, and against whom an order imposing a cease and desist order and a penalty may be issued at the conclusion of the proceeding, that person may, not later than 20 days after receiving notice of such proceeding, and at that person’s discretion, require the Commission to terminate the proceeding.

“(b) Civil Action Authorized.—If a person requires the Commission to terminate a proceeding pursuant to subsection (a), the Commission may bring a civil action against that person for the same remedy that might be imposed.

“(c) Standard Of Proof In Administrative Proceeding.—Notwithstanding any other provision of law, in the case of a proceeding brought by the Commission under a securities law, to which section 554 of title 5, United States Code, applies, a legal or equitable remedy may be imposed on the person against whom the proceeding was brought only on a showing by the Commission of clear and convincing evidence that the person has violated the relevant provision of law.”.

I’ve never heard of another place where a defendant has the discretion to insist that an enforcement action against her be dismissed – not move for it, just send notice that the defendant will be dismissing the action.  And I’ve never heard of this clear and convincing stuff before – the argument has been that the SEC has advantages before ALJs, but not particularly because of the burden of proof.  In one way, the bill would make the defendant’s decision a bit more difficult.  On the one hand, she can have court whenever she wants, but on the other, administratively, she gets the benefit of a clear and convincing standard, more demanding (in theory) than a preponderance of the evidence standard.  Decisions, decisions.