An advocacy group plans to bring a case challenging the constitutionality of the Public Company Accounting Oversight Board to the U.S. Supreme Court after an appeals court ruled against the plaintiffs earlier this week.
In a 5-4 split, the U.S. Court of Appeals for the D.C. Circuit declined to review the constitutional challenge to the legitimacy of the PCAOB, which was created by the Sarbanes-Oxley Act of 2002. The plaintiffs in the case are the Free Enterprise Fund and Beckstead & Watts, a small Nevada accounting firm that was inspected by the PCAOB. They lost the case in a smaller panel of the appeals court in August in a 2-1 decision (see Appeals Court Rules PCAOB Is Constitutional). The plaintiffs had requested a rehearing by the full appeals court.
Now an advocacy group, the Competitive Enterprise Institute, together with the law firm of Jones Day, plans to appeal to the nation's highest court. As in the original case, they are challenging the PCAOB's constitutionality on the grounds that the board violates the Constitution's appointments clause, which requires that major officers be appointed by the president with the advice and consent of the Senate. PCAOB members are selected by the Securities and Exchange Commission acting as a body, rather than by the president or the SEC chairman. The lawsuit argues that this approach avoids the individual accountability that the Framers viewed as crucial to reining in government.
PCAOB spokesperson Lucy Harvey had no comment on CEI's plans for a Supreme Court appeal, but gave the following statement on this week's appeals court victory: "We are pleased with the court's decision and look forward to continuing to fulfill the mandate given us by Congress to protect the interests of investors."
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