Decision in Free Enterprise Fund v. PCAOB

The U.S. Supreme Court today issued its decision in the constitutional lawsuit challenging the PCAOB, affirming in part and reversing in part the judgment of the Court of Appeals in favor of the PCAOB.

"We are pleased that the decision allows the PCAOB to continue without interruption to carry out its important mission of overseeing public company audits in order to protect investors and promote the public interest," said PCAOB Acting Chairman Daniel L. Goelzer.

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.