Corporate Governance

FEF v. PCAOB and the Threat to SEC Independence (Part 1)

By J Robert Brown Jr.

The Court's decision in FEF v. PCAOB turned out to be a mostly non-event.  The majority (by a 5-4 vote), struck down the for cause restriction on the removal of PCAOB board members but otherwise left the Board (and more importantly for some critics, SOX) in place, otherwise unaffected.  As a result the case quickly dropped from the news. 

Nonetheless, it is worth revisiting because of some very unfortunate analysis in Justice Breyer's dissent about whether SEC commissioners are subject to "for cause" removal by the President.  His analysis that the Commisson can in fact be "independent" without limitations on the removal of commissioners is not accurate, at least based upon any meaningful notion of independence.  To the extent that his position becomes controlling law, the Commission's independence will largely be eliminated and the tasks of the Agency far more politicized. 

We will explore this issue in the next several posts. 

Full post as published by The Race to the Bottom on October 11, 2010 (boomark / email).