SEC Wins With In-House Judges

Agency prevails against around 90% of defendants when it sends cases to its administrative law judges

Joel Shapiro faced an uphill battle when he fought the Securities and Exchange Commission in an Atlanta court last year. The investment-firm chief executive came before an SEC administrative law judge who has never fully cleared a defendant. In August, the judge found Mr. Shapiro had violated securities law, showing “reckless disregard” for his duty to investors.

The odds are once more against Mr. Shapiro as he challenges this ruling. His appeal will be decided by the SEC’s five commissioners, the same body that decided the case against him should go forward in the first place.

Mr. Shapiro, who denies any wrongdoing, called the process “the most unfair, the worst thing I’ve ever gone through.” The SEC declined to comment on his case.

An analysis by The Wall Street Journal of hundreds of decisions shows how much of a home-court advantage the SEC enjoys when it sends cases to its own judges rather than federal courts. That is a practice the agency increasingly follows, the Journal has found.

The SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year, according to the Journal analysis. That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period, based on SEC data.

Going back to October 2004, the SEC has won against at least four of five defendants in front of its own judges every fiscal year.

Full Wall Street Journal article by Jean Eaglesham

 

 

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