Today, the SEC announced its removal, effective immediately, of (now-former) Chair William Duhnke from the PCAOB. Notably, the move comes on the heels of a call by former PCAOB Investor Advisory Group members on SEC Chair Gary Gensler to reform the PCAOB, which we reported on here (see “PCAOB Reform”). PCAOB Board member Duane DesParte was designated to serve as Acting Chairperson, effective immediately. The SEC concurrently announced its intent to seek candidates for all five seats on the Board. Aside from Duhnke, three of the five seats are currently filled with members whose terms expire in October 2023, 2024, and 2025, respectively, and one seat is vacant.
SEC Commissioners Hester Peirce and Elad Roisman expressed serious concerns about the process (or lack thereof) surrounding the actions:
Although the Commission has the authority to remove PCAOB members from their posts without cause, in all of our actions, we should act with fair process, fully-informed deliberation, and equanimity, none of which characterized the Commission’s actions here. Instead the Commission has proceeded in an unprecedented manner that is unmoored from any practical standard that could be meaningfully applied in the future. We are unaware of any similar action by the Commission in connection with its oversight of the PCAOB. These actions set a troubling precedent for the Commission’s ongoing oversight of the PCAOB and for the appointment process, including with respect to attracting well-qualified people who want to serve. A future in which PCAOB members are replaced with every change in administration would run counter to the Sarbanes Oxley Act’s establishment of staggered terms for Board members, inject instability at the PCAOB, and undermine the PCAOB’s important mission by suggesting that it is subject to the vicissitudes of politics.
House Financial Services Committee Patrick McHenry (R-NC) released this statement:
This is unprecedented and a blatant politicization of an independent PCAOB,” said Republican Leader McHenry. “Chairman Gensler appears to be treating the PCAOB like a political football beholden to a left-wing Democrat Commission that panders to progressives like Elizabeth Warren. If this is the case, it’s unclear why the PCAOB should continue to exist as a separate entity from the SEC going forward. I have a lot of questions about how and why the Chair took this action, including whether or not Commissioner Lee recused herself from a Commission vote given her conflicts of interest, and I will be holding Mr. Gensler accountable for this decision.”
U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) responded similarly: "The unwarranted firing of Chairman Duhnke prior to the expiration of his term and the SEC’s plan to replace all of the PCAOB’s remaining board members is unprecedented and deeply troubling. SEC Chairman Gensler appears to have caved to the demands of liberal political activists. It’s hard not to infer from this that Chairman Gensler intends to politicize the previously apolitical PCAOB."
See these articles from Accounting Today and the WSJ.