Administrative Law and Procedure

The U.S. Constitution establishes a three-part system of government consisting of the Legislative Branch, which makes the laws, the EXECUTIVE BRANCH, which carries out or enforces the laws, and the Judicial Branch, which interprets the laws. This system of checks and balances is designed to keep any one branch from exercising too much power. Administrative agencies do not fit neatly into any of the three branches. They are frequently created by the legislature and are sometimes placed in the Executive Branch, but their functions reach into all three areas of government.

For example, the SECURITIES AND EXCHANGE COMMISSION (SEC) administers laws governing the registration, offering, and sale of SECURITIES, like stocks and bonds. The SEC formulates laws like a legislature by writing rules that spell out what disclosures must be made in a prospectus that describes shares of stock that will be offered for sale. The SEC enforces its rules in the way that the Executive Branch of government does, by prosecuting violators.

The Securities and Exchange Commission administers laws governing the actions of these traders on the floor of the New York Stock Exchange. The SEC is an independent agency that enforces its rules without need for approval from Congress or the executive branch of the government.
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It can bring disciplinary actions against broker-dealers, or it can issue stop orders against corporate issuers of securities. The SEC acts as judge and jury when it conducts adjudicatory hearings to determine violations or to prescribe punishment. Although SEC commissioners are appointed by the president subject to the approval of the Senate, the SEC is an independent agency. It is not part of Congress, nor is it part of any executive department.

Combining the three functions of government allows an agency to tackle a problem and to get the job done most efficiently, but this combination has not been accepted without a struggle. Some observers have taken the position that the basic structure of the administrative law system is an unconstitutional violation of the principle of the SEPARATION OF POWERS.