SEC appeals ruling that judge’s appointment in Gray case was improper

The U.S. Securities and Exchange Commission has appealed an Atlanta federal judge’s order, which said the agency’s primary method for adjudicating cases through an administrative law process is unconstitutional.

The appeal, filed Wednesday, asks that the appellate court overturn Judge Leigh Martin May’s Aug. 4 ruling in a case against Larry Gray and his company, which advises some of Metro Atlanta’s largest pension systems.

The SEC has accused Gray, his co-chief executive Robert Hubbard, and the company of fraud, saying they steered public pension investments to a company-owned fund that did not adhere to particular constraints in Georgia law. May’s ruling didn’t address the substance of the SEC’s case.

May ruled Aug. 5 that the SEC’s method of appointing administrative law judges (ALJs) to preside over those hearings is unconstitutional, and the agency would have to take a different tact. May’s ruling is technical and doesn’t address the merits of the case, which she was never asked to consider.

The SEC has made an identical appeal in the unrelated case of Charles Hill, Jr., who is accused of using insider trading to make $744,000 on a series of investments.

The government’s appeal also asks May to reconsider her ruling.

“It does not seem reasonable to expect that Judge May will somehow reverse herself from what are exceptionally well-reasoned and authoritative decisions in Gray and Hill, especially after the 11th Circuit also has rejected the same tactic by the SEC in Hill,” Gray’s attorney Terry Weiss said.

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