Guide to Proceedings Before a PCAOB Hearing Officer
All parties against whom the Public Company Accounting Oversight Board (PCAOB) has initiated proceedings (Respondents) have the right to a hearing. Hearings may be conducted in person before a PCAOB Hearing Officer or, in some circumstances, may consist solely of the submission of written materials.
This Guide is intended to provide answers to questions often asked by Respondents and attorneys unfamiliar with proceedings before a PCAOB Hearing Officer. The information contained in this Guide is not a complete summary of, an interpretation of, or a substitute for, the PCAOB's Rules. The PCAOB's Rules governing proceedings before a PCAOB Hearing Officer are available at: http://pcaobus.org/Rules/PCAOBRules/Documents/Section_5.pdf. All parties to proceedings before a PCAOB Hearing Officer, including Respondents who are representing themselves (pro se Respondents), are expected to read, become familiar with, and comply with the PCAOB's Rules.
This Guide is not legal advice. Respondents should read the PCAOB's Rules carefully and consider consulting their own advisors.
This Guide was prepared by members of the PCAOB's staff and is not a statement by the PCAOB or by any of the members of the PCAOB's Board (the Board).
Office of the Hearing Officer
When the PCAOB issues an Order Instituting Disciplinary Proceedings charging one or more Respondents with violations, or when a registration applicant files a request for a hearing, the PCAOB's Secretary assigns a Hearing Officer to preside over the proceeding and prepare a decision resolving the issues in the case (an Initial Decision). The Hearing Officer is an attorney who is employed by the PCAOB but is independent of the Division of Enforcement and Investigations and all other PCAOB Divisions responsible for initiating and conducting proceedings before the PCAOB. The Hearing Officer serves as an impartial initial adjudicator of disciplinary charges and certain proceedings involving registration applications.
Right to Counsel
Respondents in a proceeding before the PCAOB are entitled to be represented throughout the proceeding by an attorney of their choice. The PCAOB encourages all Respondents to consider retaining an attorney. However, the PCAOB cannot appoint or pay for a Respondent's counsel, and the Hearing Officer presiding over a proceeding and other members of the PCAOB's staff cannot act as counsel for any Respondent.
Designation of Address for Service
All Respondents, including pro se Respondents, must provide the PCAOB's Secretary with an email and mailing address at which notices or other written communication may be served upon them during the proceeding and a telephone number at which they may be reached during business hours. Please refer to Rule 5401 for further information regarding appearances before the PCAOB.
Communications with the Hearing Officer
Other than during prehearing conferences or at the hearing itself, no party should attempt to communicate directly with the Hearing Officer. Instead, all communications should be directed to the Case Administrator assigned to the proceeding by the Office of the Hearing Officer (email: [email protected]; telephone: 202-591-4127).
During a prehearing conference or at a hearing, the parties, including pro se Respondents, may ask the Hearing Officer questions if they do not understand procedures or rulings, but no party may engage in "ex parte communications" with the Hearing Officer, which are communications with the Hearing Officer about the merits of a case without all the parties being present. Please refer to Rule 5403.
Filing Required Papers
Unless otherwise directed by the Hearing Officer, parties are required to file all of their pleadings and other papers electronically by transmitting them as an attachment in Portable Document Format to an email sent to [email protected]. Additionally, copies of every document filed in connection with a proceeding must be sent to all parties to the proceeding. Please refer to Rules 5404 through 5407 for other requirements related to filings.
Answers by Respondents
In its Order Instituting Disciplinary Proceedings, the PCAOB may require a Respondent to file an answer to the allegations. An answer is typically due within 20 days after service upon a party of an Order Instituting Disciplinary Proceedings, with the exception that an answer is due within 5 days after service upon a party in a case that solely involves a charge of noncooperation with a PCAOB investigation.
A Respondent's answer must specifically admit, deny, or state that a party does not have, and is unable to obtain, sufficient information to admit or deny, each allegation in the Order Instituting Disciplinary Proceedings. Any allegation that is not denied may be deemed admitted. Respondents must also raise in the answer any affirmative defenses to the charges in the Order Instituting Disciplinary Proceedings or risk waiving those defenses. Please refer to Rule 5421.
The Hearing Officer may deem a Respondent to be in default if the Respondent fails to timely file an answer, respond to a dispositive motion or appear at a prehearing conference or hearing of which he or she has notice, or otherwise fails to defend the proceeding. After a default, the Hearing Officer may deem the allegations in the Order Instituting Disciplinary Proceedings to be true, and may order the relief requested. Please refer to Rule 5409(a).
Phases of Proceedings
Proceedings before a PCAOB Hearing Officer typically have a Prehearing, Hearing, and Post-Hearing phase.
At the outset of a proceeding, the Hearing Officer typically issues a case management order setting forth procedures that implement and supplement the procedures set forth in the PCAOB's Rules. In addition, the Hearing Officer schedules an initial prehearing conference with the parties to establish a schedule for the completion of the proceeding and to set a date for the hearing on the merits. At least one additional prehearing conference is usually conducted prior to the hearing. Also, the parties are usually required to exchange copies of exhibits and the names and other information about their witnesses prior to the hearing, and to file prehearing briefs. A party's failure to comply with the deadlines established in a schedule ordered by the Hearing Officer may subject the party to default or other consequence short of default (such as, for example, an inability to call a witness at the hearing on the merits if the party failed to identify that witness in a pre-hearing witness list).
Hearings on the merits are scheduled at the earliest possible date, consistent with the complexity of the case and the needs of the parties. Most hearings are held in the PCAOB's Washington, D.C., offices, but, upon request by a party, for the convenience of parties and witnesses, the Hearing Officer may agree to conduct all or a portion of the hearing at another location.
Rules 5422 to 5426 govern the availability of discovery to the parties during the proceeding. Unless otherwise ordered, the interested Division is required to make certain documents available for inspection and copying to any Respondent who is not in default. Additionally, upon a request by a Respondent, the Hearing Officer may order the interested Division to produce for inspection and copying certain witness statements. Respondents may also request the issuance of an accounting board demand of a registered public accounting firm or an associated person of a registered firm, or an accounting board request of another person. The issuance of an accounting board demand or request is subject to the requirement that such a demand or request is reasonable in scope and reasonably calculated to encompass, or lead to the discovery of, admissible evidence.
During the prehearing phase, any party may file a written request that the Hearing Officer make a specified ruling or order (a motion). Only the Hearing Officer (or in circumstances when a motion is being considered by the Board, the Board) can rule on a motion; the fact that all parties consent to the relief sought does not determine the outcome. Motions must state with particularity the grounds for the request and the relief that is sought, and must be accompanied by a written brief of the points and authorities relied upon. Any opposition must be filed within 5 days, and no reply brief may be filed unless permitted by the Hearing Officer. Please refer to Rule 5408. Absent extraordinary circumstances, the Board will not grant requests for review of any ruling by a Hearing Officer that does not fully resolve all of the issues and claims in a proceeding. Please refer to Rule 5461.
If there are no material facts in dispute, Rule 5427 permits the filing of a motion for summary disposition, a procedure that allows the Hearing Officer to resolve the case without the need for a hearing on the merits. Please refer to Rule 5427 for more information about the availability and requirements of the summary disposition procedure.
Respondents may, at any time, propose in writing an offer of settlement. Rule 5205 describes settlement offer requirements and process.
A hearing on the merits before a PCAOB Hearing Officer is, in many respects, similar to a trial before a judge in a state or federal court. The Hearing Officer may permit or direct the parties to make opening statements. The interested Division will present witnesses and offer exhibits first since it has the primary burden of proof. Each Respondent also has the right to present witnesses and offer exhibits. Any Respondent raising an affirmative defense will have the burden of proving that affirmative defense. Any party may object to testimony or documentary evidence on the grounds that it is irrelevant, immaterial, or unduly repetitious. Please refer to Rule 5442. A pro se Respondent called to testify may also object to answering questions for the same reasons. Any party may cross-examine any adverse witness.
At the hearing, a Respondent who is an individual may exercise his or her right guaranteed by the Fifth Amendment to the Constitution to refuse to testify as to any matter that may tend to be incriminating. However, in a civil proceeding such as a hearing before the PCAOB, an adverse inference may be drawn from a Respondent's refusal to answer a question based upon an assertion of the Fifth Amendment's protections.
Following the hearing, unless otherwise ordered by the Hearing Officer, the parties may submit proposed findings of fact and conclusions of law and briefs containing legal arguments in support of their positions. The Hearing Officer then prepares an Initial Decision, including findings of fact, conclusions of law and, if appropriate, sanctions. The Hearing Officer files the Initial Decision with the PCAOB's Secretary, who sends copies of the Initial Decision to all parties.
An Initial Decision as to a party becomes the PCAOB's final decision as to that party upon issuance of a notice of finality. A party may seek Board review of an Initial Decision by timely filing a petition for review, or the Board may order review on its own initiative. The PCAOB's Secretary will issue a notice of finality as to a party no later than 20 days after the expiration of the time for filing a petition for review of the Initial Decision as to that party, unless such a petition has been timely filed or the Board has on its own initiative ordered review of the Initial Decision with respect to that party. Please refer to Rules 5204 and 5460.
Parties to a disciplinary proceeding (other than a proceeding that solely involves a charge of noncooperation with a PCAOB investigation) and parties to a proceeding to determine whether to approve or disapprove a registration application pursuant to Rule 5500 may obtain Board review of an Initial Decision by filing a petition for review within 30 days after service of the Initial Decision; parties to a disciplinary proceeding that solely involves a charge of noncooperation with an investigation may obtain Board review of an Initial Decision by filing a petition for review within 10 days after service of the Initial Decision. Respondents who fail to timely file a petition for review may lose their opportunity to have the Board review the Initial Decision.
Please refer to Rules 5460 through 5467 for a more complete discussion of procedures relating to appeals to the Board from rulings by a Hearing Officer.
Other Related Materials
- Office of Hearing Officers Charter: A collection of requirements, policies, and practices the PCAOB has in place to promote and protect the impartiality of PCAOB hearing officers, the Charter itself gives rise to no rights or remedies.
- Address: 1666 K Street NW, Washington, DC 20006
- Email: [email protected]
- Phone: 202-591-4127