The U.S. Court of Appeals for the District of Columbia upheld a lower court decision on the constitutionality of the PCAOB and Sarbanes-Oxley Act, which spawned the regulator.
The plaintiffs in Free Enterprise Fund v. PCAOB argued that SOX and the PCAOB violate the appointments clause, separation of powers and nondelegation principles of the Constitution because PCAOB board members hold significant regulatory power yet are appointed by the SEC, not by the president with the advice and consent of the Senate.
The appeals court held 2-1 that the manner in which PCAOB board members are appointed and overseen under Sarbanes-Oxley is constitutional. SEC commissioners, who are appointed by presidential nomination with Senate consent, “exercise comprehensive control over Board procedures and decisions and Board members. For instance, the Commission approves all Board rules,” Justice Judith W. Rogers wrote for the majority in the appellate court ruling.
