A larger-than-life advisor dubbed the “Turnaround Queen” is challenging the way regulators try errant players who’ve allegedly run afoul of clients
By Nate Raymond
NEW YORK, Sept 15 (Reuters) - The U.S. Securities and Exchange Commission's controversial use of in-house judges to enforce federal securities laws is about to undergo a major test.
The 2nd U.S. Circuit Court of Appeals in New York on Wednesday will hear arguments over whether to revive a lawsuit by Lynn Tilton, a private equity chief dubbed the "Diva of Distressed," to block the SEC from pursuing fraud charges in an in-house administrative proceeding instead of federal court.
Critics say the proceedings are unfair because there are no juries, and defense lawyers have a limited ability to depose witnesses and gather evidence. Some, including Tilton, also say the appointment of administrative judges, who are on the SEC payroll, is unconstitutional.
It’s an interesting case for observers here in Canada because the OSC and other regulators rely on the courts when it comes to fraud-related cases unlike in the U.S.
The SEC charged Tilton, 56, and her Patriarch Partners firm in March with hiding the poor performance of assets underlying three collateralized loan obligation funds that raised over $2.5 billion.
Tilton and Patriarch deny wrongdoing, and have said their investment strategy was consistently disclosed. Should the court not intervene, Tilton faces trial on Oct. 13.
The decision by the 2nd Circuit could prove a major factor in the SEC's ability to continue pursuing enforcement actions administratively, invoking the 2010 Dodd-Frank law granting it the authority to bring more cases before its in-house court.
The SEC has boosted its percentage of administrative cases to 80.8 percent in 2014 from 69.4 percent in 2013.
Critics said the increase followed a series of prominent jury trial losses for the SEC, including the 2013 insider trading trial of billionaire Mark Cuban.
NEW YORK, Sept 15 (Reuters) - The U.S. Securities and Exchange Commission's controversial use of in-house judges to enforce federal securities laws is about to undergo a major test.
The 2nd U.S. Circuit Court of Appeals in New York on Wednesday will hear arguments over whether to revive a lawsuit by Lynn Tilton, a private equity chief dubbed the "Diva of Distressed," to block the SEC from pursuing fraud charges in an in-house administrative proceeding instead of federal court.
Critics say the proceedings are unfair because there are no juries, and defense lawyers have a limited ability to depose witnesses and gather evidence. Some, including Tilton, also say the appointment of administrative judges, who are on the SEC payroll, is unconstitutional.
It’s an interesting case for observers here in Canada because the OSC and other regulators rely on the courts when it comes to fraud-related cases unlike in the U.S.
The SEC charged Tilton, 56, and her Patriarch Partners firm in March with hiding the poor performance of assets underlying three collateralized loan obligation funds that raised over $2.5 billion.
Tilton and Patriarch deny wrongdoing, and have said their investment strategy was consistently disclosed. Should the court not intervene, Tilton faces trial on Oct. 13.
The decision by the 2nd Circuit could prove a major factor in the SEC's ability to continue pursuing enforcement actions administratively, invoking the 2010 Dodd-Frank law granting it the authority to bring more cases before its in-house court.
The SEC has boosted its percentage of administrative cases to 80.8 percent in 2014 from 69.4 percent in 2013.
Critics said the increase followed a series of prominent jury trial losses for the SEC, including the 2013 insider trading trial of billionaire Mark Cuban.
