## Facts

- The SEC brought an administrative enforcement action against David F. Bandimere for alleged violations of federal securities laws.
- An SEC administrative law judge (ALJ) conducted a trial-type hearing, found Bandimere liable, and imposed sanctions including an industry bar, cease-and-desist relief, civil penalties, and disgorgement.
- The SEC (as the Commission) reviewed and affirmed the ALJ’s decision and rejected Bandimere’s Appointments Clause objection.
- Bandimere petitioned for review in the U.S. Court of Appeals for the Tenth Circuit under 15 U.S.C. §§ 77i(a) and 78y(a)(1), arguing the ALJ was an “inferior Officer” not appointed in compliance with the Appointments Clause.
- The Tenth Circuit reviewed the constitutional question de novo.

## Issues

1. Whether the court of appeals had jurisdiction to consider Bandimere’s Appointments Clause challenge to the SEC’s final order.
2. Whether SEC ALJs are “inferior Officers” under the Appointments Clause, requiring appointment by the President, a court of law, or a department head, and whether the ALJ who presided over Bandimere’s case was properly appointed.

## Decision

- The court held it had jurisdiction to review the Appointments Clause challenge because Bandimere raised it before the Commission and the governing review statutes authorize judicial review of the SEC’s order.
- The court held SEC ALJs are “inferior Officers” because they occupy continuing positions established by law and exercise significant authority in adversarial adjudications.
- The court concluded the ALJ in Bandimere’s case was not appointed in a manner consistent with the Appointments Clause.
- The court granted the petition for review and vacated the SEC’s order (with further proceedings required on remand consistent with the constitutional ruling).
- One judge concurred in the result; one judge dissented.

## Legal Principles

- An official is an “Officer of the United States” if the position is continuing and established by law and the official exercises significant authority under federal law.
- SEC ALJs exercise significant authority where they conduct hearings, take testimony, rule on evidence and motions, regulate proceedings, make credibility determinations, and issue initial decisions on liability and sanctions that may become final agency action if not reviewed.
- Officer status does not depend on the official having final decision-making power in every case; meaningful adjudicatory authority can be sufficient.
- If an adjudicator required to be appointed under the Appointments Clause was not appointed by a constitutionally permitted appointing authority, the resulting agency action is constitutionally defective and cannot stand.

## Conclusion

The Tenth Circuit held that SEC ALJs are inferior officers subject to the Appointments Clause’s appointment requirements and vacated the SEC’s order against Bandimere because the ALJ who presided over the administrative proceeding was not constitutionally appointed.


Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016)