The Supreme Court just made it much harder to go after financial fraud

• The Supreme Court stripped out some of the SEC's financial fraud enforcement powers.
• It ruled that defendants in those cases have a right to a jury trial.
• Critics say the court is seizing power from federal agencies and making it harder to enforce fraud laws.

The Supreme Court dealt a blow to the US Securities and Exchange Commission in a ruling Thursday, sharply limiting the way it pursued financial fraud cases.

Until today, the SEC had two ways of pursuing fraud cases. It could sue in federal district court. Or it could bring an "administrative proceeding" in its own in-house court, where it appoints its own judges and the cases have no juries.

In Thursday's SEC v. Jarkesy decision, Chief Justice John Roberts wrote that the latter method violated the Seventh Amendment of the US Constitution, which protects the right to a jury trial.

"A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator," Roberts wrote.

The ruling stripped out part of 2010's Dodd-Frank Act, which was passed in the wake of the 2008 financial crisis and gave federal agencies more enforcement mechanisms.

In this case, the SEC accused George Jarkesy, Jr. and his financial firm, Patriot28, of lying to investors about the firm's value and lying about the identity of its auditor and broker.

Critics of the decision argue that the SEC's in-house courts worked much more efficiently than federal district courts. The SEC has hired its own judges, who were presumably knowledgeable about financial fraud laws and could handle cases relatively quickly. And they could be predictable and consistent, unlike trial juries.

By contrast, there are fewer than 700 federal district court judges. They handle all sorts of cases, not just financial fraud. And each one must be appointed by the President of the United States and must be approved by the US Senate, a process that can take months and is often held up by partisan fighting.

Critics have also argued that such a ruling is part of a larger project among conservative judges to dismantle the so-called "administrative state" of government regulation, despite the wishes of a democratically elected Congress and president.

The ruling was decided 6-3, with appointees of Republican presidents all in the majority and Democratic appointees dissenting.

Sonia Sotomayor, who wrote the dissenting opinion, wrote that the majority decision disrespected the separation of powers between the different branches of government. She said that, throughout the country's history, the federal government has frequently delegated enforcement mechanisms to individual agencies.

"Make no mistake: Today's decision is a power grab," she wrote.

She also warned that the decision could have ramifications for other agencies, such as how the Department of Labor could resolve workplace issues, or the Occupational Safety and Health Administration could handle safety concerns.

"By giving respondents a jury trial, even one that the Constitution does not require, the majority may think that it is protecting liberty," Sotomayor wrote. "That belief, too, is deeply misguided. The American People should not mistake judicial hubris with the protection of individual rights."