Tuesday, July 28, 2015

Latest Turn in Duka Administrative Proceeding: New Presiding Judge

By Jacquelyn Lumb

Administrative law judge (ALJ) James E. Grimes has been named to replace Cameron Elliott as the presiding judge in the SEC’s proceeding against Barbara Duka, a former managing director at Standard & Poor’s Ratings Services whom the SEC alleges perpetrated a scheme which led to false and misleading statements about S&P’s post-financial crisis methodology for rating certain mortgage-backed securities. Chief ALJ Brenda P. Murray made the change pursuant to delegated authority (In the Matter of Barbara Duka, July 24, 2015, Murray, B.).

Constitutional challenge. The SEC instituted the proceeding against Duka on January 21, 2015. Before the proceeding was commenced, Duka, on January 16, filed a complaint in the U.S. District Court for the Southern District of New York against the SEC in which she sought declaratory and injunctive relief from being compelled to submit to an allegedly unconstitutional SEC administrative proceeding.

In her complaint, Duka contended that SEC administrative law judges who are responsible for adjudicating the administrative proceedings enjoy at least two layers of tenure protection, which insulate them from Presidential oversight, rendering the proceedings unconstitutional on their face because they violate Article II of the U.S. Constitution. The court concluded that Duka was not entitled to preliminarily enjoin the SEC proceedings because she was unlikely to succeed on the merits of her constitutional claim.

Latest ruling. Elliott was designated as the ALJ to preside over the Duka proceedings on January 22, 2015, and set a hearing date for September 16. In his latest ruling, on July 8, he denied Duka’s motion for adjournment of the hearing.

The Release is No. AP-2969.

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