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For securities industry professionals — advisors, brokers, public company officers and directors for example — how the Securities and Exchange Commission enforces the federal securities laws matters.
Consider the circumstances of Michelle Cochran versus David Martin.
Certified public accountants in Texas, both have practiced before the SEC as accountants preparing or auditing public company financial statements.
The SEC alleged that Cochran and Martin aided and abetted a public company's failure to file accurate periodic reports. The SEC imposed monetary penalties against both of them, and barred them from practicing before the commission as accountants.
However, a critical difference between the two CPAs is that the SEC first brought suit against Martin in federal court and later sought to bar him under in an administrative proceeding, thus affording him a right to have a jury determine whether he had violated the federal securities laws before imposing penalties.
Because the SEC elected to bring suit against Cochran in front of its own administrative law judge, Cochran will never enjoy her constitutional right to have a jury determine whether she violated the federal securities laws. The SEC currently has complete control over a defendant's constitutional right to a jury simply by where the SEC chooses to bring its enforcement action.
Earlier this year, Cochran filed a lawsuit in federal court seeking an order halting the SEC administrative proceeding against her.
The SEC had paused that proceeding while waiting to hear from the U.S. Supreme Court about whether SEC ALJs were properly appointed. After the Supreme Court declared the SEC ALJs unconstitutional last year, the SEC changed the way its ALJs were appointed and pushed forward with its administrative proceeding against Cochran.
