Securities and Exchange Commission Historical Society

Chasing the Devil Around the Stump: Securities Regulation, the SEC and the Courts

An Era of Caution

Uncertain Future

Despite the dramatic evolution of securities law and its place in legal history, many of the dilemmas that the SEC faced from its earliest days remain. The extent to which courts will defer to the administrative interpretation of the agency in interpreting Congressional legislation, the complicated relationship between administrative rulemaking and enforcement and economic rights and due process, and the proper balance between judicial deference and individual liberty continue to befuddle the courts. In addition, the resurgent philosophy of originalism expressed most acutely by Supreme Court Justices Antonin Scalia and Clarence Thomas pose new complications to statutory interpretation and judicial review.73

The constantly-evolving terrain of securities products and practices, countered by Congressional attempts to regulate the industry and promote informational transparency and consumer fairness, make Justice Frankfurter’s comment about chasing the devil around the stump particularly evocative today. The devil is always in the details. The use of constitutional and legal history to understand the development of securities law has never been more important. As one commentator has put it, “The power of the courts to interpret the Constitution, and the expectation that they will supply cogent reasoning in justification of their interpretation, presents a dilemma of modernity peculiar to the American judiciary. We expect the judiciary to be both contemporary and rational when expounding constitutional law.”74 Understanding the terrain of securities legal history will help make that chase more logical and promote the essential goals of certainty and fairness for litigants and practitioners alike.

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(73) For an analysis of the conservative bent of the court and the doctrine of originalism, see Earl M. Maltz, Rehnquist Justice: Understanding the Court Dynamic (University Press of Kansas: Lawrence, 2003).

(74) Charles A. Miller, The Supreme Court and the Uses of History (Simon and Schuster: New York, 1969), 50.

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