A federal appellate court in Colorado has ruled that SEC Administrative Law Judges (ALJ’s) hired without proper deference to the selection and appointment regime demanded by the Constitution’s Appointments Clause hold their offices in violation of the US Constitution. On this basis, these 10th district justices overturned an SEC enforcement action against one Mr. Bandimere, stating: “Because the SEC ALJ was not constitutionally appointed, he held his office in violation of the Appointments Clause….[And because t]he SEC ALJ held his office unconstitutionally when he presided over Mr. Bandimere’s hearing. We…set aside the SEC’s opinion.”
The Bandimere decision was based on a seemingly minor point, whether or not the SEC ALJ’s are to be considered “employees” or “inferior officers” at the the executive branch. Furthermore, the decision is currently only the law in the 10th federal circuit (other circuits have come to the opposite conclusion). However, for the first time in recent memory, a panel of federal judges in the US has ruled that there are limits to just how far the SEC can bend the law in its hunt for bad guys.