A federal judge in Atlanta might have thrown a wrench into a key cog in the way the Securities and Exchange Commission handles certain securities cases.
U.S. District Court Judge Leigh Martin May on Monday ordered a temporary halt to a securities fraud case against an Atlanta man before an administrative law judge over constitutional questions of about using an in-house judge.
The ruling came in a lawsuit against the SEC by Charles L. Hill Jr., an Atlanta man accused by the regulator of insider trading. The ruling was first reported by the Wall Street Journal.
Hill allegedly acquired more than 100,000 shares of Radiant Systems stock after learning about a potential sale of the company to Duluth-based NCR, the SEC alleged in a civil lawsuit filed against the developer in February.
Hill has denied any wrongdoing. He sued the SEC in federal court to stop the case from proceeding before an administrative law judge.
The administrative law judge route has been a path for relatively quick disposal of certain types of securities cases.
The SEC often uses administrative “cease-and-desist” proceedings under a 1990 act of Congress, which was broadened under the 2010 Dodd-Frank Wall Street reforms to cover people who aren’t registered with the SEC. Prior to the expansion under Dodd-Frank, the SEC was required to seek claims against “unregistered” individuals in federal court.
Hill’s attorneys argued that the SEC has “unfettered discretion to select its forum” for such cases, even against people not regulated by the agency.
NCR approached Radiant about a possible combination in May 2011. Between June 2011 and July 2011, Hill allegedly purchased about $2.1 million in Radiant stock and realized profits of about $744,000 when he sold his shares after the NCR deal was announced, the original SEC complaint said.
