(left to right) Chief Justice Harlan Stone, Associate Justice James Clark Reynolds, Associate Justice Hugo Black and Associate Justice Felix Frankfurter
(Courtesy Library of Congress )
Over the next three decades, the SEC fought and won an impressive number of cases in the courts. From 1940 to the early 1970s, with only a few notable exceptions, the SEC’s expansive interpretation of the 1933 and 1934 Acts was accepted by the courts.41 This record of success was led by the behind-the-scenes work of SEC lawyers, a mixture of expert rulemaking and smart litigating, and the role of academic experts on the Supreme Court that worked in conference to help shape SEC successes.
Under SEC Chairman William O. Douglas and his successor chairmen, the work of the SEC in studying and analyzing the securities industry, drafting regulations, and implementing the rules became an important reason why the institutional reputation of the agency grew within the courts. The judicial philosophy of the Supreme Court, now populated with New Deal justices, accepted a greater role for the administrative state to implement broad economic regulations legislated by Congress. From 1936 to the early 1970s, the SEC demonstrated an impressive and almost unchallenged series of successes in cases appealed to the Court.
(41) See Robert B. Thompson and E. Thomas Sullivan, “The Supreme Court and Private Law: The Vanishing Importance of Securities and Antitrust”, 53 Emory Law Journal: 1571-1644 (2004). In the article, the authors categorize all relevant SEC cases in Appendix A and rank them as expansive/restrictive toward SEC regulatory powers.
