The U.S. Court of Appeals for the 10th Circuit in Denver ruled that the SEC’s process for hiring administrative law judges for its in-house courts violates a clause of the U.S. Constitution that governs presidential and other appointments. The case stems from an SEC administrative action brought against a Colorado businessman charged with fraud related to a Ponzi scheme. In his appeal of the case, the businessman argued that the SEC administrative law judge presided over his hearing in violation of the Appointments Clause because ALJs are “inferior officers,” who must be selected by the SEC’s commissioners. The SEC conceded that the ALJ had not been constitutionally appointed but argued that ALJs lack final decision-making power and are merely agency employees. The 10th Circuit judges ruled 2-1 against the SEC, concluding that SEC ALJs are “inferior officers” and noting that the ALJ who presided over the businessman’s hearing was not appointed by the President, a court of law, or a department head and therefore held his office in conflict with the Appointments Clause. A previous ruling by the U.S. Court of Appeals for the District of Columbia Circuit upheld the SEC’s use of its in-house judges, and the issue now appears headed to the U.S. Supreme Court.