In an Order issued on May 18, the Supreme Court of the United States granted a petition for a writ of certiorari in a case challenging the constitutionality of the Public Company Accounting Oversight Board (PCAOB), established pursuant to the Sarbanes-Oxley Act of 2002.
Plaintiff in the action asserts that the provisions of the Sarbanes-Oxley Act creating the PCAOB violate separation of powers principles and the Appointment Clause of the U.S. Constitution in that the PCAOB’s members are appointed by the Commissioners of the Securities and Exchange Commission who also have authority to remove PCAOB members. Plaintiffs allege that PCAOB members are “principal officers” who, under the Constitution, are required to be appointed by the President and confirmed by the Senate, and that the President must have the power to remove PCAOB members. Certiorari was granted after the U.S. Court of Appeals for the D.C. Circuit rejected plaintiff’s arguments, finding, among other things, that the PCAOB’s members are “inferior officers” and therefore need not be appointed by the President pursuant to the Appointment Clause, and that the President’s indirect power through the SEC to remove such officers was sufficient.
The case will be heard during the Supreme Court’s October term.
(Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 537 F, 3d 667 (D.C. Cir. 2008))
(Free Enterprise Fund v. Public Co. Accounting Oversight Bd., _ S.Ct. _, 2009 WL 46537, 77 USLW 3431 (U.S. May 18, 2009))