Document ID: ./input/supremecourt_opinions/opinions/23pdf/22-859new_kjfm.pdf
Page Number: 63.0

Cite as:  603 U. S. ____ (2024) 

3 

SOTOMAYOR, J., dissenting 

Act of 1933, the Securities Exchange Act of 1934, and the 
Investment Advisers Act of 1940.  Specifically, the SEC al-
leged  that  respondents  falsely  told  brokers  and  investors 
that: (1) a prominent accounting firm would audit the hedge
funds; (2) a prominent investment bank would serve as the
funds’ prime broker; and (3) one of the funds would invest 
50% of its capital in certain life-insurance policies.  In real-
ity,  the  audit  never  took  place,  the  bank  never  opened  a
prime brokerage account, and the hedge fund invested less
than 20% of its capital in the life-insurance policies.  In ad-
dition to misrepresenting the funds’ investment strategies,
respondents  allegedly  overvalued  the  funds’  holdings  to 
charge higher management fees.

The SEC assigned the action to one of its administrative
law judges, who held an evidentiary hearing and issued a 
lengthy initial decision, concluding that respondents in fact 
had violated the three securities laws.  The full Commission 
reviewed the initial decision and reached the same deter-
mination.  The  Commission  also  denied  respondents’  con-
stitutional  challenges  to  the  order,  including  that  the 
agency’s  in-house  adjudication  violated  respondents’  Sev-
enth Amendment right to a jury trial in federal court.  Ul-
timately, the SEC ordered respondents to pay a civil pen-
alty of $300,000 and to cease and desist from violating the 
federal-securities laws.  It also barred Jarkesy from doing 
certain  things  in  the  securities  industry  and  ordered  Pa-
triot28 to disgorge $685,000 in illicit profits.

Respondents filed a petition for review in the Fifth Cir-
cuit.  34 F. 4th 446, 466 (2022).  A divided panel granted the 
petition and vacated the SEC’s order.  The panel held, over
the dissent of Judge Davis, that respondents were entitled 
to a jury trial in federal court under the Seventh Amend-
ment  because  the  federal-securities  antifraud  provisions
were similar to common-law fraud claims to which the jury-
trial right would attach.  See id., at 451–459.  Because the 
SEC forced respondents to proceed within the agency, the