The U.S. Supreme Court, on June 28, 2010, issued its decision in the constitutional lawsuit that challenged the PCAOB, affirming in part and reversing in part the judgment of the Court of Appeals in favor of the PCAOB. The case, Free Enterprise Fund vs. Public Company Accounting Oversight Board, was brought on behalf of a Nevada accounting firm, Beckstead & Watts, which challenged the constitutionality of the law after objecting to the PCAOB’s inspection findings. The Free Enterprise Fund, a group opposed to government regulation, has lost the case twice before, in district and appeals courts.
The PCAOB Web site (http://pcaobus.org/Pages/default.aspx) posted the following: “The Supreme Court held that the Sarbanes-Oxley Act’s provisions making PCAOB Board members removable by the Securities and Exchange Commission (SEC) only for good cause were inconsistent with the Constitution’s separation of powers. Because the Court severed these provisions from the Act, however, no legislation is necessary to bring the Board’s structure within constitutional requirements. The consequence of the Court’s decision is that PCAOB Board members will be removable by the SEC at will, rather than only for good cause. All other aspects of the SEC’s oversight, the structure of the PCAOB and its programs are otherwise unaffected by the Court’s decision. Accordingly, all PCAOB programs will continue to operate as usual, including registration, inspection, enforcement, and standard-setting activities.”