The latest episode in the seven-year battle between a former San Diego investment adviser and the SEC over allegedly misleading marketing – a case that gave the IA
a U.S. Supreme Court victory last year – has the Justice Department arguing that Ray Lucia can’t seek to dismiss the continuing ALJ enforcement action against him.

A court filing June 3 by the DOJ in federal court in California asserts that court precedent holds that the SEC’s enforcement action must play out.

After the High Court last year found part of the SEC’s ALJ system to be unconstitutional and ordered the case against Lucia to be returned to the ALJ setting (albeit with a different judge overseeing the case, IA Watch, June 22, 2018), Lucia filed a lawsuit last November seeking to have his case dismissed altogether, claiming the ALJ system remains unconstitutional due to how the judges can be fired (IA Watch, Nov. 29, 2018).

“Here, the sole object of Plaintiffs’ claim is to prevent the SEC from continuing the enforcement proceedings,” argued the DOJ, noting the case remains unfinished. “And Plaintiffs could prevail before the Commission” ultimately, the DOJ continued.

“The SEC has used ALJs since the Commission’s early days,” the filing reads. The DOJ also disputes Lucia’s claims that the Commission took too long to hold a hearing after the case was originally filed in 2012. Also, federal law permits the Commission to remove ALJs, thus not violating the Constitution’s separation of powers’ provisions, the DOJ argued.

Déjà vu all over again

One of Lucia’s attorneys, Margaret Little of the New Civil Liberties Alliance in Washington, D.C., says should the DOJ’s argument prevail “that means that Ray Lucia will be tried a second time” before an SEC ALJ “who is still unconstitutional.” Should Lucia lose for a second time, then he would be forced to engage in the entire appeals process all over again, she added.

Little noted that Supreme Court Justice Stephen Breyer warned last year that the issue of the constitutionality of the SEC ALJ setting could return to the High Court over the hiring and firing issue.

Lucia “is determined to vindicate his constitutional right to only be tried before a constitutional judge,” states Little.

A DOJ attorney didn’t return IA Watch inquiries. An August hearing is set in U.S. District Court for Southern California.


Written by Carl Ayers
Originally published by regcompliancewatch.com