Creating Circuit Split, Fifth Circuit Rules District Court May Hear Constitutional Challenge to SEC Enforcement Action

On Dec. 13, 2021, an en banc panel of the Fifth Circuit held that the Securities Exchange Act of 1934 (Exchange Act) does not preclude federal district courts from exercising subject matter jurisdiction over constitutional challenges to the statutory removal protections insulating administrative law judges (ALJs) employed by the Securities and Exchange Commission (SEC). The decision runs counter to conclusions several other circuits reached on the same question, setting up a circuit split for potential resolution of the question by the Supreme Court…

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