The United States Constitution lays out the principle of the separation of powers in three simple steps. Article I of the Constitution gives Congress the power to make the laws of the United States. Article II entrusts the President to take care that the laws be faithfully executed, usually through the actions of other executive branch individuals. Article III then charges the federal courts with applying the laws passed by Congress and enforced by the executive branch when deciding cases and ordering remedies. This constitutional structure avoids concentrating excessive power in any one branch—a protection that is lost when all three functions are put in the hands of a single agency.

Thanks to the rise of the administrative state, agencies like the Securities and Exchange Commission are taking over responsibility for all three functions. The agency promulgates extensive regulations that have the force of law, which it then enforces against individual defendants, often in an SEC tribunal, not in an Article III court. This cozy arrangement is now being tested in Lucia v. Securities and Exchange Commission, argued last week before the Supreme Court.

Before his run in with the SEC, Raymond J. Lucia was an investment professional who regularly gave complimentary public presentations on his “Buckets of Money” (BOM) strategy for individual retirees. BOM starts with a diversified stock portfolio in which low-risk investments are sold first, allowing high-risk investments more time to appreciate. Lucia’s standard presentation relied on a large deck of slides, two of which gave “hypothetical” examples of how this strategy might work. The SEC ultimately determined that these slides were seriously misleading, even though they had repeatedly passed muster before a private industry group known as FINRA (The Financial Industry Regulatory Authority) and had previously been presented to the SEC, which had raised no objection to them. None of the 50,000 people who attended these presentations over the years filed any complaint against Lucia, let alone lost any money. At these presentations, Lucia asked attendees to contact him directly if they wanted additional personal advice.