Refuting the Myth of “Equitable” Administrative Sanctions

After the Supreme Court ruled last year in SEC v. Jarkesythat the Securities and Exchange Commission can no longer impose civil monetary penalties in its juryless home-court administrative tribunals, a consensus emerged that agencies might still use their administrative tribunals to prosecute cases that threaten only non-monetary, purportedly “equitable” sanctions—such as industry bars and suspensions, restitution, disgorgement, and cease-and-desist orders.

That consensus is profoundly wrong and must be refuted at every available opportunity before agencies successfully convince unsuspecting courts to go along with it.

Stated as simply as possible, agencies like the SEC have no lawful power to adjudicate cases in equity or to dispense remedies in equity. None.

Article III of the Constitution could not be clearer on this point.  It vests “the judicial Power of the United States” in “one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.”  It then says this judicial power extends “to all Cases, in Law and Equity” (my emphasis).  In other words, it makes no difference whether a federal agency’s case involves equitable claims rather than legal ones; either way, the case can be decided only in an Article III court.

Thus, the notion that agencies like the SEC can adjudicate “equitable” claims or impose “equitable” sanctions in their own administrative proceedings is an oxymoron.  It’s complete nonsense, especially when the agency awards these purportedly equitable remedies to itself.  If an agency’s claim or sanction is truly equitable in nature, the Constitution says it can be resolved only in an Article III court.  Viewed from the flipside, any case that might lawfully be adjudicated in an Article II administrative agency tribunal cannot, by definition, be a case in equity, because such cases are entrusted exclusively to Article III courts and are categorically off-limits to Article II agencies.

Of course, just because a case needs to be decided in a real Article III court does not automatically mean the defendant gets a jury trial.  To the extent there are genuinely equitable claims or remedies in play, a court can and likely will decide those claims and remedies without a jury, at least when those claims and remedies are not joined with others that are legal in nature.  But whether or not a jury must decide the case is a separate question from the antecedent one that asks where the case must be decided.  That’s what the Supreme Court meant when it wrote in Jarkesy that once a case is brought within the bounds of federal jurisdiction, “an Article III court must decide it, with a jury if the Seventh Amendment applies” (my emphasis again).

To be sure, Congress has empowered agencies to impose certain sanctions in administrative proceedings that bear passing (and in some cases even close) resemblance to traditional remedies awarded by courts of equity.  For example, statutory administrative cease-and-desist orders and industry bar orders bear some resemblance to equitable injunctions, and some kinds of statutory restitution and disgorgement agencies can impose in administrative proceedings may look superficially similar to equitable remedies a court might award.  But they are fundamentally different for constitutional purposes, because the former are merely statutory sanctions at law, just like the statutory monetary penalties at issue in Jarkesy—that is, they are not true equitable remedies, nor can they be, and therefore the jury trial right attaches just as it does when monetary penalties are threatened.

Regrettably, the SEC, Congress, courts, and even some SEC defense practitioners have muddied the waters with sloppy language over the course of many years.  For example, in the context of trying to evade statutes of limitations, the SEC has long insisted, without citing any relevant judicial precedent, that “an industry bar, cease-and-desist order, and disgorgement are equitable remedies” even when imposed administratively by non-judicial agency administrators.

Congress has used similarly careless language.  For example, when creating the Consumer Financial Protection Bureau in 2010, lawmakers purported to give the Bureau coextensive power with federal courts “to grant any appropriate legal or equitable relief with respect to a violation of Federal consumer financial law.”  And when Congress recklessly slipped an extension of the SEC’s statute of limitations into a year-end omnibus defense spending bill when nobody was paying attention, the legislation listed “a bar, suspension, or cease and desist order” as examples of “equitable” remedies.  Fortunately, however, Congress cannot override the constitutional separation of powers even with brilliantly crafted legislation, much less with stealthy slapdash riders inserted in the dead of night.

Even the Fifth Circuit’s decision in Jarkesy, which the Supreme Court affirmed, got this wrong.  In dictum explaining why Mr. Jarkesy’s jury trial right was not diminished by the SEC’s administrative imposition of an industry bar and disgorgement in addition to monetary penalties, that court loosely characterized those other SEC sanctions as “more equitable in nature” than monetary penalties, and later described them as “both equitable remedies.”

NCLA is working hard to ensure that courts avoid the same mistake going forward.  In a recent brief in the U.S. Court of Appeals for the D.C. Circuit, we argued that when the SEC threatens to bar or suspend a private citizen from working in the securities industry, even without the additional threat of monetary penalties, it must prosecute its case in an Article III court with a jury trial rather than in its own juryless administrative tribunal.  Shortly after we filed that brief, the SEC voluntarily dismissed a long-running administrative prosecution of our client.

We’ve also made similar arguments in the Sixth Circuit and in the D.C. District Court concerning industry bars and suspensions threatened by, respectively, the Financial Industry Regulatory Authority (FINRA) and the Public Company Accounting Oversight Board (PCAOB).  Such bars and suspensions are common-law sanctions.  They are not “equitable” remedies, and even if they were, the Constitution and Jarkesy would require that they be sought and imposed, if at all, only in an Article III court.

The sooner courts dispense with the oxymoronic myth of “equitable” administrative sanctions, the better.

September 30, 2025