In a 2-1 decision, the U.S. Court of Appeals for the Fifth Circuit ruled that the SEC’s use of an administrative judge violated a defendant’s seventh amendment right to a jury trial. Judge Elrod, who was appointed to the court by President George W. Bush, wrote the majority opinion.

Why should we care?
At the moment, the Fifth Circuit’s ruling only applies to its jurisdiction, which includes Texas, Louisiana, and Mississippi. But that could change if the Supreme Court agrees to take up the case, and a decision to uphold the Fifth Circuit’s ruling could throw a massive wrench in the way the SEC decides many enforcement actions. And, troublingly, the SEC is not the only agency to use administrative judges. For example, in March, the CFPB quietly rolled out new routes for enforcement, favoring administrative courts over their (slower) federal counterparts. The Fifth Circuit may have catalyzed an eventual sea change, then, in how those who violate financial laws are responded to across enforcement agencies, which may make for a more centralized—yet slower—pipeline for financial enforcement. This could be a disservice to the financial landscape as a whole, since institutions will have to wait longer to understand how the government will or won’t regulate financial products and services. Other questions remain: Why did the Fifth Circuit’s majority rule this way? Is this decision just an ambitious effort to expand the purview of federal courts, or is it a genuine attempt to safeguard constitutional rights? Is this another example of finance and conservative politics clashing across boardrooms and courts?