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Abstract

This Note analyzes and explains the current issues and criticism regarding the SEC’s use of ALJs. In particular, this Note recommends that the SEC ratify its ALJs in accordance with constitutional requirements, create a rigid formula for its forum selection, and amend its Rules of Practice to align more closely to the procedural due process rights in federal district courts. As many of these topics are currently being discussed in federal courts of appeals and within the SEC—through its proposed amendments to the Rules of Practice—this Note intends to add to the discussion on a topic with very little scholarly research. In the SEC’s defense, the SEC’s mission to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” is a necessary and important mission. Regardless of the mission, individuals are still guaranteed constitutional rights to procedural due process of law when there is a possibility of being “deprived of life, liberty or property .” The first Part of this Note will discuss the historical expansion of the SEC’s enforcement powers. Part II will discuss the current enforcement procedures and the SEC’s recently proposed amendments to its Rules of Practice. Part III will discuss the recent constitutional challenges that defendants have brought against the SEC and the issues regarding subject matter jurisdiction in federal district courts. Part IV will propose three recommendations that the SEC should follow to avoid future criticism of its administrative proceedings.

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