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Free Enterprise Fund v. Public Company Accounting Oversight Board

United States Supreme Court
561 US 477 (2010)

Free Enterprise Fund v. Public Company Accounting Oversight Board


In 2002, Congress enacted the Sarbanes-Oxley Act. Among other provisions, it provided for regulating of the accounting industry by a new Public Company Accounting Oversight Board (Board) (defendant). The Board was to be composed of five members, appointed to staggered five-year terms. The Board is under the oversight of the Securities and Exchange Commission (SEC), but the SEC cannot remove Board members except for good cause. SEC Commissioners determine whether there is good cause to remove a Board member. SEC Commissioners cannot be removed by the President except for “inefficiency, neglect of duty, or malfeasance in office.” The Board began an investigation of Beckstead and Watts, LLP, a Nevada accounting firm, after it found deficiencies in its accounting procedures in an inspection. Beckstead and Watts and the Free Enterprise Fund, a non-profit organization of which Beckstead & Watts is a member, (plaintiffs) brought suit, seeking, inter alia, a declaratory judgment that the Board is unconstitutional because the Board’s protection from removal is in conflict with Article II’s vesting of the executive power in the President. The lower courts rejected plaintiffs’ claims. The Supreme Court granted certiorari.

Rule of Law


Holding and Reasoning (Roberts, C.J.)

Dissent (Breyer, J.)

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