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The SEC's 'Home Court' Advantage

The agency has higher success rate when it takes cases in front of its own judges than it does in the federal court system, investigation finds.

Lawyers talk of “venue shopping,” or filing cases in courts strategically selected as likely to be sympathetic to one’s client. But none can match options available to the Securities and Exchange Commission, where five administrative law judges and even the five commission members have power to rule on enforcement actions.

An investigation by the Wall Street Journal published Thursday found that the SEC is increasingly using its “home court advantage” (the option dates to the 1940s) and enjoying its successes. Of hundreds of decisions reviewed, the regulatory agency for Wall Street won 90 percent of cases against defendants accused of financial crimes from October 2010 to March 2015, compared with only a 69 percent success rate using federal courts.

“Going back to October 2004, the SEC has won against at least four of five defendants in front of its own judges every fiscal year,” wrote reporter Jean Eaglesham.

The success rate also appears at the appeals level, where the commissioners themselves decided in their own agency’s favor concerning 53 out of 56 defendants—or 95 percent of the time—from January 2010 through this past March, the Journal determined.

Though SEC officials declined to comment for the investigation, past statements from Chairman Mary Jo White and other officials defend the in-house adjudication as fair, though their own data show a slightly lower success rate of 88 percent. They attribute the in-house success to the “mix” of cases, with the most complex cases involving, for example, insider trading, remaining in the court system.

“By bringing more cases in its own backyard, the agency is not only increasing its chances of winning but giving itself greater control over the future evolution of legal doctrine,” said Joseph Grundfest, a former commissioner now teaching law at Stanford University.

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