The Public Company Accounting Oversight Board (“PCAOB”) has proposed amendments to affirm that its hiring practices for hearing officers for auditor disciplinary proceedings are subject to approval by the Securities and Exchange Commission (“SEC”).
Announced last week, the proposed changes come after last summer’s Supreme Court ruling in Lucia vs. SEC that the agency’s process for hiring administrative law judges was unconstitutional. The Supreme Court stated that under the Appointments Clause of the U.S. Constitution, administrative law judges are inferior officers and must be appointed by the president, a court of law, or a department head (e.g, the SEC). The SEC’s five administrative law judges were hired by the chief administrative law judge.
Comments on SEC Release No. 34-85090, Notice of Filing of and Immediate Effectiveness of Proposed Bylaw and Rule Amendments to Provide that the Board’s Appointment and Removal of Hearing Officers Are Subject to Commission Approval, are due 21 days following the proposal’s publication in the Federal Register. The PCAOB said the SEC’s approval of its hearing officer’s appointment will lead to the hearing officer being appointed similarly to an inferior officer for purposes of the Appointments Clause.