A year after vowing to take more of its law-enforcement cases to trial, Securities and Exchange Commission officials now say the agency will increasingly bypass courts and juries by prosecuting wrongdoers in hearings before SEC administrative law judges, also known as ALJs. “I think you’ll see that more and more in the future,” SEC Enforcement Director Andrew Ceresney told a June gathering of Washington lawyers, adding that insider trading cases were especially likely to go before administrative judges.

The 2010 Dodd-Frank law vastly expanded SEC discretion to charge wrongdoers administratively, and this summer the agency increased the number of administrative law judges on staff to five from three in anticipation of an increased workload. This follows a recent string of SEC jury-trial losses in federal courts, though agency officials insist the timing is coincidental.

Coincidence or not, a surge in administrative prosecutions should alarm anyone who values jury trials, due process and the constitutional separation of powers. The SEC often prefers to avoid judicial oversight and exploit the convenience of punishing alleged lawbreakers by administrative means, but doing so is unconstitutional. And if courts allow the SEC to get away with it, other executive-branch agencies are sure to follow.

To begin with the obvious, executive-branch agencies like the SEC are not courts established under Article III of the Constitution. These agencies exercise legislative power through rule-making and executive power through prosecution, but the Constitution gives them no judicial power to decide cases and controversies—especially not the very cases they are prosecuting. Executive agencies usurp that judicial power when they shunt penal law-enforcement prosecutions into their own captive administrative hearings.

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Nearly 70 years ago, the Administrative Procedures Act established today’s system of quasi-judicial tribunals overseen by administrative law judges. But these tribunals are not courts, and the administrative law judges are not life-tenured judicial officers appointed under Article III of the Constitution. They are executive-branch employees who conduct hearings at the direction of agency leaders following procedural rules dictated by the agencies themselves.

The SEC’s rules favor the prosecution. The rules give the accused only a few months to prepare a defense—after SEC prosecutors have typically spent years building the case—and they give administrative law judges only a few months after the hearing to evaluate the mountains of evidence presented and write detailed decisions that typically run several dozens of single-spaced pages. The rules also allow SEC prosecutors to use hearsay and other unreliable evidence, and they severely limit the kinds of pretrial discovery and defense motions that are routinely allowed in courts.

Administrative hearings also do not have juries, even when severe financial penalties and forfeitures are demanded. And because these hearings are nominally civil rather than criminal, guilt is determined by a mere preponderance of the evidence—the lightest evidentiary burden known to modern law—rather than beyond reasonable doubt. In short, while administrative prosecutions create the illusion of a fair trial, and while administrative law judges generally strive to appear impartial, these proceedings afford defendants woefully inadequate due process.

More important, the proceedings violate the Constitution’s separation of powers. Every phase of the proceeding, and every government official involved, is controlled by the agency in its role as chief prosecutor. The SEC assigns and directs a team of employees to prosecute the case. It assigns another employee, the administrative law judge, to decide guilt or innocence and to impose sanctions. Appeals must be taken to the same SEC commissioners who launched the prosecution, and their decision is typically written by still other SEC employees.

The entire process ordinarily takes years, during which many SEC targets are bankrupted by legal costs and their inability to find work with reputable companies. Only after SEC commissioners decide all appeals can the accused finally seek relief from a federal court. But appeals rarely succeed because the law requires courts to defer to the agency’s judgment, especially on disputed facts.

The SEC used to employ administrative proceedings for relatively uncontroversial purposes such as preventing suspicious stock offerings, suspending rogue brokers or consummating settlements where no court involvement was necessary. But through a series of laws beginning in the 1980s and continuing through Dodd-Frank, the SEC has been transformed from a conventional regulator into a penal law-enforcement prosecutor with enormous power to punish private citizens and businesses. In 2013 the agency obtained a record $3.4 billion in monetary sanctions, and it now routinely seeks million-dollar sanctions against accused wrongdoers.

On its website, the SEC accurately describes itself as “first and foremost” a law-enforcement agency. As such, the agency should play no role in deciding guilt and meting out punishment against the people it prosecutes. Those roles should be reserved for juries and life-tenured judges appointed under Article III of the Constitution. Today’s model of penal SEC law enforcement is categorically unsuited for rushed and truncated administrative hearings in which the agency and its own employees serve as prosecutor, judge and punisher. Such administrative prosecution has no place in a constitutional system based on checks and balances, separation of powers and due process.

Mr. Ryan, a former assistant director of enforcement at the SEC, is a partner with King & Spalding LLP, and his clients include companies and individuals involved in SEC law-enforcement proceedings.