The Commission initiates an administrative proceeding by issuing an order instituting proceedings, which contains the Division of Enforcement's allegations against one or more respondents. In most cases, an order instituting proceedings directs that a public hearing be held before an administrative law judge for the purpose of taking evidence, determining whether the allegations are true, and issuing an initial decision within a specific time period.
Administrative law judges serve as independent adjudicators. Under the Administrative Procedure Act and the Commission's Rules of Practice, administrative law judges conduct public hearings in a manner similar to federal bench trials, at locations throughout the United States. They preside at and regulate the course of these hearings, which may include setting filing deadlines, issuing subpoenas, holding prehearing conferences, and ruling on motions. Following the hearing, the parties may submit briefs, as well as proposed findings of fact and conclusions of law. The administrative law judge prepares an initial decision setting forth his or her factual findings and legal conclusions and, where appropriate, determining whether sanctions are warranted.
If a respondent fails to file an answer to the order instituting proceedings, appear at a conference or hearing, respond to a dispositive motion, or otherwise defend the proceeding, the administrative law judge may issue an initial decision finding the respondent in default and accepting the allegations as true. In certain proceedings, summary disposition, as opposed to a live hearing, may be used to resolve all or some of the issues.
Depending on the statutory basis for the proceeding, an administrative law judge may find that sanctions are warranted. Sanctions may include: cease-and-desist orders; investment company and officer-and-director bars; censures, suspensions, limitations on activities, or bars from the securities industry and/or participating in an offering of penny stock; censures or denials of the privilege of appearing or practicing before the Commission; disgorgement of ill-gotten gains; civil penalties; and suspension or revocation of an issuer's registered securities, as well as the registration of a broker, dealer, investment company, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. An administrative law judge may also order that a fair fund be established for the benefit of persons harmed by a respondent's violations. Sanctions take effect only by order of the Commission, however.
An administrative law judge's initial decisions are subject to de novo review by the Commission, which may affirm, reverse, modify, set aside, or remand for further proceedings. A party to the proceeding may petition the Commission for review, or the Commission may choose to review an initial decision on its own initiative. If a party does not file a timely petition for review, and the Commission does not order review on its own initiative, the Commission's Rules of Practice provide that the Commission will issue an order stating that the initial decision has become final. Appeals of Commission decisions may be taken to an appropriate U.S. Court of Appeals.
Initial decisions and orders issued by administrative law judges appear in legal research databases and are posted on the Commission's website, http://www.sec.gov/alj.
Also, the Office of the Secretary maintains webpages for open and closed administrative proceedings:
For fiscal year 2017, administrative law judges issued 121 initial decisions and held sixteen hearings. Collectively, these proceedings culminated in the imposition of over $3 million in disgorgement and over $1 million in civil penalties.