Elon Musk and Mark Cuban express skepticism about the Securities and Exchange Commission’s (SEC) internal adjudication system. They advocate for a significant overhaul in the way the SEC handles legal actions.
Elon Musk and Mark Cuban, through their collaborative endeavors, are challenging the SEC’s practice of conducting internal hearings without the involvement of a jury. Their unified stance is reflected in a joint amicus brief submitted to the Supreme Court.
This brief fundamentally questions the legality of the SEC’s internal adjudication procedures and how they might impact the sacred right to a trial by jury as enshrined in the Seventh Amendment.
Musk and Cuban’s Challenge to the SEC At the crux of this challenge lies the case of SEC vs. Jarkesy. George Jarkesy, the plaintiff, asserts that his Seventh Amendment rights were violated. This happened when the SEC chose an internal adjudication process. This process was overseen by an administrative law judge appointed by the commission.
Musk and Cuban posit that this setup effectively grants unchecked authority to a solitary entity, thereby affording it the roles of judge, jury, and executioner. Such an arrangement raises substantial concerns surrounding the principles of impartiality and due process.
Key Points in the Elon Musk and Mark Cuban Challenge to SEC’s Internal Proceedings
As per the amicus brief, the SEC made a notable change in its approach between 2013 and 2014. This shift was prompted by a series of unsuccessful insider trading cases that had previously gone before juries in federal courts. This alteration marked a significant change in the strategies employed by this regulatory agency.
Moreover, in April 2022, the SEC acknowledged a lapse in which personnel had mistakenly accessed files associated with multiple cases, including Jarkesy’s. This incident raised doubts about the perceived fairness of these internal hearings.
Complicating matters further, in July 2023, the SEC introduced new regulations. Consequently, these regulations now require public corporations to promptly disclose significant data breaches within just four days. This requirement persists, despite 2021 internal control issues related to file sharing, with the report submitted a year later.
Elizabeth Prelogar, the Solicitor General of the Department of Justice, argues that the 5th Circuit’s support for Jarkesy’s stance was fundamentally mistaken. Furthermore, she contends that Congress did not violate the Seventh Amendment by granting the SEC the power to initiate administrative actions for civil penalties.
Additionally, Prelogar strongly urges the Supreme Court to overturn its previous ruling. On November 29, the Supreme Court will review an appeal initiated by the Biden administration. This appeal challenges the decision of the 5th U.S. Circuit Court of Appeals, which favored George Jarkesy.
Elon Musk’s Legal Dispute with the SEC and the Challenge to Internal Proceedings
Presently, Elon Musk is enmeshed in a legal battle with the SEC. The regulatory body is seeking judicial intervention to compel Musk’s testimony concerning his acquisition of Twitter, with a particular emphasis on his public pronouncements linked to the transaction.
Musk and Cuban urge the justices to support the 5th Circuit’s decision. They also advocate for the reversal of the directive to remand to the commission.
Moreover, according to their legal representatives, choosing internal proceedings over federal court juries contradicts the SEC’s fundamental mission. Additionally, they argue that such choices jeopardize investors and the markets, which the SEC is constitutionally obligated to protect.
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