## Facts

- Charles W. Steadman, a securities professional, was charged by the Securities and Exchange Commission (SEC) with violating antifraud provisions of the federal securities laws.
- The matter was tried in an on-the-record administrative hearing before an Administrative Law Judge (ALJ), followed by SEC review.
- The SEC found violations and imposed professional sanctions, using a preponderance-of-the-evidence standard.
- Steadman sought judicial review, arguing that the SEC was required to apply a clear-and-convincing evidence standard because the proceedings involved allegations of fraud and serious sanctions.

## Issues

1. Whether § 7(c) of the Administrative Procedure Act (APA), now codified at 5 U.S.C. § 556(d), requires the SEC to apply a clear-and-convincing evidence standard in antifraud adjudications that may result in sanctions.
2. Whether the SEC may instead determine antifraud violations in such administrative proceedings using a preponderance-of-the-evidence standard.

## Decision

- The Supreme Court affirmed the judgment upholding the SEC’s order (7–2).
- The Court held that § 7(c) of the APA governs SEC adjudications and permits use of the preponderance-of-the-evidence standard when determining whether antifraud provisions were violated.
- The Court rejected the argument that the APA or due process required a clear-and-convincing standard in these SEC enforcement proceedings.
- The SEC’s sanctions against Steadman remained in effect.

## Legal Principles

- In agency adjudications governed by 5 U.S.C. § 556(d), the requirement that sanctions be supported by “reliable, probative, and substantial evidence” implies an evidentiary burden for the agency’s factfinding, not merely a judicial-review test.
- Absent a contrary statutory directive, the ordinary civil standard—preponderance of the evidence—is the default burden of proof in federal administrative adjudications imposing sanctions.
- “Substantial evidence” is not itself a trial-level burden of persuasion; the statute’s phrasing contemplates that the agency weighs evidence under an internal burden of proof.
- Legislative history and consistent agency practice may confirm that Congress expected preponderance to apply in APA-governed adjudications.
- The Constitution does not require a heightened clear-and-convincing standard for SEC antifraud adjudications solely because they involve allegations of fraud and professional consequences.

## Conclusion

The Court held that SEC antifraud violations adjudicated on the record under the APA may be proven by a preponderance of the evidence, and neither the APA nor due process compels a clear-and-convincing evidentiary standard in such proceedings.


Steadman v. SEC, 450 U.S. 91 (1981)