Will the Bandimere 10th Circuit ruling force the SEC to dismantle its Kafkaesque In-House Fun-House? No, not yet. But stay tuned to this channel…

Can the Bandimere 10th Circuit ruling force the SEC to respect due process?

Not yet, no. At this time, Bandimere is only the law of the land in the 10th Federal Circuit. But at this point in time and in this part of the country, the federal judiciary has ruled that only SEC ALJ’s (Administrative Law Judges) that were properly appointed under the Constitution’s Appointments clause (i.e. appointed by the President or otherwise as the clause specifies) are considered fit to preside (or to have presided) over cases before them. In theory, that means that every legal matter ruled on by such a “judge” must be considered a nullity in the 10th circuit.

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We have what law geeks refer to as a “circuit split” because some federal circuits have reached the opposite conclusion on the same question.  This is a big deal because a circuit split virtually forces the US Supreme Court to step in and clean up the mess.

Before the Supreme Court gets involved, however, the 10th Circuit will almost certainly pull together all its judges “en banc” to see if they still agree or disagree with the 3-judge panel’s ruling against illegally appointed ALJ’s. The SEC is virtually guaranteed to vigorously challenge the 10th circuit at every stop along the way, so it is premature to say that we have yet achieved a meaningful victory for due process or equal protection under the law.

Regardless, this is an important ruling because it signals that the federal bench is finally questioning the wisdom of giving so much unchecked power to a federal policing body. The Bandimere decision is the first time in recent memory that the federal bench has challenged the previously sacrosanct role of the SEC as judge, jury and executioner in civil matters before itself.  (And if you don’t like an ALJ’s ruling, you can always appeal to the folks that write their paychecks, the SEC commission!  Good luck with that.)

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Author: Eric D. Wanger

Eric has nearly 30 years of experience as a creative and entrepreneurial professional in roles ranging from general management, team leadership and project management to technical rolls in IT, software development financial services and law. He has run business units, managed teams and delivered projects for established global enterprises and as the founder of a number of startups. Over his nearly 30 years at work, his job titles have included Board Member (public, private and non-profit), President, Founder, Chief Operating Officer, Director of Research, Chief Investment Officer, Fund Manager, Software Developer, Securities Analyst, Web Designer, Systems Integrator, Investment Advisor, Fundraiser, Consultant and Attorney. As a software consultant, cloud based, mobile app software as a consultant to one of the world’s leading electronic medical records companies (Cerner). As Chief Investment Officer and Director of Research for a startup financial services firm (Wanger OmniWealth, LLC), he developed a proprietary, risk-based holistic reporting platform for wealthy families and a set of allocation models based on it. He has developed automated trading systems for equity and equity ETF's. Between 2002 and 2013, Eric served as a portfolio manager of the Long Term Opportunity fund (small/micro-cap equities), the Alternative Fixed Income Fund (blend of exchange traded and privately negotiated debt) and as the strategist and founder (with Ralph Wanger) for the Income and Growth Fund (multi-asset class dividend strategy). Eric was a senior investment analyst at Barrington Research Associates (Chicago) covering technology and business services. Prior to that, Eric was a software, communications, and technology analyst for the Edgewater Funds, a private equity/venture capital firm with over $1 billion under management. Before joining Edgewater funds in 2000, Eric worked in Silicon Valley providing consulting, training, and software development to early-¬stage firms. Between 1991 and 1996, Eric was a principal consultant at EDW, Ltd, a firm he founded to provide software development, training in rapid software development techniques (NeXT), and systems interoperability consulting services for large multi-vendor and distributed computer networks. EDW's clients included such companies as Fannie Mae, MCI, Swiss Bank Corp (UBS), Chrysler, Merrill Lynch, Apple Computer, Stanford University, and The Acorn Funds. Eric received his J.D. from Stanford Law School and is a member of the California Bar. He was co-founder and managing editor of the Stanford Technology Law Review. Eric was awarded a National Merit Scholarship in 1981. He holds a B.S. in Mathematics from the University of Illinois at Urbana-¬Champaign and received a Chartered Financial Analyst designation in 2005. Eric lives in Chicago with his three children and a fat English Labrador retriever named Casper. He enjoys classical and jazz piano, hiking and aviation. He is an instrument rated pilot. Eric serves as a trustee for the Acorn Foundation and is active at Chicago’s Museum of Science and Industry.

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