SAN DIEGO ADVISER RAYMOND LUCIA ASKS FOR REHEARING ON CHALLENGE TO SEC IN-HOUSE COURTS

Last month, San Diego-based investment adviser Raymond Lucia suffered a rejection by a panel of the U.S. Court of Appeals for the District of Columbia Circuit of his request that the court consider his challenge to the constitutionality of the SEC’s use of in-house courts.

SEC v. Adviser

Lucia, a well-known investment adviser with a long career, was charged by the SEC with conducting misleading investment seminars that promoted a “buckets of money” investing strategy that was purportedly supported by empirical testing, when no such reliable testing had been done. The SEC proceeding resulted in what Lucia’s own attorneys described as a “career-ending lifetime industry bar”.

The basis for Lucia’s challenge, rejected by the panel, was that the SEC’s selection of administrative law judges violated the Appointments Clause of the Constitution. Lucia today petitioned the court for a rehearing on the matter before all judges of the court, in order to determine whether the panel’s decision was wrong. 

Powerhouse Petition Calling On Precedent

Lucia is being represented by powerhouse securities lawyer Mark Perry of Gibson, Dunn & Crutcher. In the brief for rehearing en banc, Lucia argues that the panel erroneously concluded that the Appointments Clause does not apply to SEC ALJ’s because they are not “Officers” under that Clause. The panel relied on Circuit precedent that an ALJ without authority to issue final rulings cannot be deemed an Officer, but Lucia argues in his petition that such qualification flies in the face of prior U.S. Supreme Court precedent, and would remove a vast swath of administrative law judges across a number of federal government agencies from coverage under the Appointments Clause.

Lucia’s attorneys were not shy in the petition – calling the panel’s decision “at war” with Supreme Court precedent and the Constitution itself. We’ll see what judges in the D.C. Circuit may be inclined to agree if the petition for rehearing is granted. 

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.