The Liu case marks four consecutive years in which the SEC has faced a major Supreme Court challenge to its enforcement practices. It comes on the heels of the aforementioned Kokesh case in 2017, Lucia v. SEC in 2018, and Lorenzo v. SEC in 2019, continuing what appears to be the longest streak of its kind since the SEC created its Division of Enforcement in 1972. Add in the case of Gabelli v. SEC in 2013 – in which the Court unanimously rejected the SEC’s long-standing contention that its five-year time limit for filing enforcement cases shouldn’t even start to run until the agency discovers the wrongdoing at issue – and the Commission has had an unusually busy and challenging Supreme Court docket over the past decade.
And the results have not been especially favorable to the agency. Of the four enforcement cases already decided by the Supreme Court in the past decade, the SEC lost three of them (all except Lorenzo), and in two of the losses (Gabelli and Kokesh) not a single justice agreed with the agency’s litigation position. (And I’m not counting the Court’s 2018 decision in Digital Realty Trust, Inc. v. Somers, which unanimously invalidated one of the SEC’s whistleblower rules, because that case wasn’t an enforcement case and because the SEC wasn’t a named party.)
That’s a remarkably unimpressive run for a government agency that has historically enjoyed broad bipartisan support and an excellent reputation in the courts.
‘Enforcement 40’ for 2020
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