On Monday, the Supreme Court agreed to rule on the constitutionality of the Public Company Accounting Oversight Board. The Sarbanes-Oxley Act passed in 2002 created PCAOB as a new government agency to regulate firms that audit the books of publicly traded companies. The key question in the case is whether the Act violated the separation-of-powers doctrine. The case is Free Enterprise Fund v. PCAOB (08-861).
In this challenge, Free Enterprise Fund and Beckstead and Watts, LLP, LLP contend that Title I of the Sarbanes-Oxley Act of 2002 , 15 U.S.C. §§ 7211-19, violates the Appointments Clause of the Constitution and separation of powers because it does not permit adequate Presidential control of the Public Company Accounting Oversight Board. Congress made the Board’s exercise of its duties subject to the control of the Securities and Exchange Commission. The SEC sets the rules and may remove members. In turn, the President appoints members of the SEC, with the advice and consent of the Senate, and may remove them for cause. In appellants’ view this scheme vests Board members “with far reaching executive power while completely stripping the President of the authority to appoint or remove those members or otherwise supervise or control their exercise of that power.”
Effectively, they object that the members of PCAOB, an independent agency, are appointed by the SEC, another independent agency, instead of the President. Neither the President of the United States nor a Presidential alter ego possesses any power to remove PCAOB members for cause or otherwise.
The D.C. Circuit did not accept this challenge and ruled in favor of PCAOB and the United States.
- Court to Rule on Sarbanes-Oxley from SCOTUSblog
- The PCAOB: An Obstacle to President Obama’s Sucess – by Kenneth Starr and Viet Dinh in a Wall Street Journal opinion piece (They represent the Free Enterprise Fund)
- D.C. Circuit Opinion in Free Enterprise Fund v. PCAOB – hosted on JD Supra
- Petition for certiorari from SCOTUSblog
- Brief in opposition for respondents Public Company Accounting Oversight Board from SCOTUSblog
- Brief in opposition for the United States from SCOTUSblog
- Petitioner’s reply from SCOTUSblog
- Brief amicus curiae of Washington Legal Foundation (in support of petitioners) from SCOTUSblog
- Brief amicus curiae of Mountain States Legal Foundation (in support of petitioners) from SCOTUSblog
- Brief amicus curiae of American Civil Rights Union (in support of petitioners) from SCOTUSblog