The Securities and Exchange Commission could see its ability to adjudicate cases in-house significantly undermined by two recent cases, according to news reports.

In May, the U.S. Court of Appeals for the Fifth Circuit deemed aspects of the SEC’s administrative process, including the removal procedure for its in-house judges, unconstitutional.

The court ruled in favor of Houston hedge fund manager and radio host George Jarkesy and his investment firm Patriot28, writing that they are guaranteed a jury trial by the Seventh Amendment because the SEC’s “enforcement action is akin to traditional actions at law to which the jury-trial right attaches.”

Now, another case pending with the U.S. Supreme Court, SEC v. Cochran, could challenge the process further, according to FA-IQ sister publication FundFire.

In that case, the SEC charged Texas accountant Michelle Cochran with fraud for failing to comply with Public Company Accounting Oversight Board auditing standards, the publication writes.

After the Supreme Court ruled four years ago in Lucia v. SEC that the agency’s administrative law justices must be appointed by either the president, a court of law or a department head, the SEC was forced to return all pending cases to internal judges that had been appropriately appointed, according to FundFire.

The Lucia ruling led to a second hearing in the Cochran case before a constitutionally appointed internal SEC judge, the publication writes. The Cochran case is now going before the Supreme Court, according to FundFire.

“Both Cochran and Jarkesy represent significant challenges to the constitutionality of the commission’s authority to proceed,” said Daniel Hawke, a partner at Arnold & Porter, according to the publication.

Hawke, who is also a former chief of the SEC’s market abuse unit and ex-director of the SEC’s Philadelphia Regional office, added that the Jarkesy decision, unless overturned, “poses an existential threat to the SEC’s ability to use its administrative process to bring enforcement actions,” according to the publication.

David Rosenfeld, an associate professor of law at Northern Illinois University, said the cases indicate “that the courts are revisiting a lot of issues relating to administrative law, [and] it obviously could have a significant impact.”

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