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Factbox-US Supreme Court case on SEC could have wide impact on agency enforcement

FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C.

By Mike Scarcella

(Reuters) - The U.S. Supreme Court on Wednesday heard arguments on whether the U.S. Securities and Exchange Commission (SEC) has the power to pursue defendants in its own in-house tribunal rather than in federal court. The outcome of the case could affect how the SEC and other U.S. federal agencies enforce regulations.

Here's a look at some of the current cases that are awaiting the Supreme Court's decision, which is expected by the end of June.


The SEC in February brought an administrative case against certified public accountant and Marcum LLP partner Alan Markowitz over claims that he failed to follow standards in auditing investment company FTE Networks Inc. Markowitz has denied the allegations.

Markowitz sued the SEC in Manhattan federal court in May to halt its case, arguing that the SEC lacks constitutional authority to pursue its claims through its in-house forum and that he is entitled to a jury trial.

The SEC in August issued an order pausing the administrative action pending the outcome of the Supreme Court case, in which President Joe Biden's administration is appealing a lower court's decision restricting the SEC's in-house tribunal system.

An SEC website shows dozens of other pending administrative cases before the agency.


In another in-house SEC case, former PricewaterhouseCoopers auditor Joshua Abrahams is facing an October 2022 complaint from the agency over his work reviewing financial statements for toy manufacturer Mattel Inc.

California-based Mattel last year agreed to pay $3.5 million to settle SEC claims over financial misstatements in 2017. Mattel did not admit or deny any wrongdoing.

The SEC accused Abrahams of failing to follow certain professional standards, and an order against him could restrict his ability to appear or practice before the agency.

Abrahams has denied the agency's claims. His administrative proceeding is also paused until the Supreme Court rules.


Legal experts said the Supreme Court's decision on the scope of the SEC's powers could have broader consequences for other agencies that also pursue some enforcement claims internally.

In one of those cases, biotech company Illumina is challenging a U.S. Federal Trade Commission order in April that it divest from cancer diagnostic test maker Grail. An administrative law judge last year said the $7.1 billion acquisition did not violate antitrust law, but the FTC's staff successfully appealed the ruling.

Attorneys for San Diego-based Illumina have argued that Congress did not provide the FTC any "intelligible principle" to decide which cases to file in an administrative proceeding rather than in U.S. court. The FTC has rejected that argument.

Illumina's challenge to the FTC's divestiture order is pending in the New Orleans-based 5th U.S. Circuit Court of Appeals.

(Reporting by Mike Scarcella; Editing by David Bario and Aurora Ellis)