(Reuters) – The US Supreme Court on Monday agreed to hear the Securities and Exchange Commission’s attempt to block a questioning of the constitutionality of its internal court brought by a Texas auditor who was punished by the agency for failing to audit its listings of listed companies.
The judges took up the SEC’s appeal of a lower court decision that revived Authorized Public Accountant Michelle Cochran’s challenge. The lower court rejected the agency’s argument that under the Securities Exchange Act, Ms. Cochran did not question the constitutionality of the tribunal’s judge in federal court before the SEC’s administrative enforcement proceedings against her ended.
Cochran̵7;s case is similar to a case involving Taser manufacturer Axon Enterprise Inc., which is contesting an antitrust action against another federal agency, the Federal Trade Commission. The Supreme Court in January agreed to try Axon’s appeal of a lower court ruling that threw out its questioning of the constitutionality of the FTC’s structure.
An 2017 SEC judge had found that Cochran failed to comply with auditing standards in violation of the Securities Exchange Act, fined her $ 22,500 and banned her from practicing as an auditor before the Commission for five years. The SEC referred to shortcomings in its audits of listed companies.
Cochran sued the SEC in 2019 to stop the enforcement action against her, arguing that its internal judges, who uphold investor protection laws and regulations, have employment protections that illegally isolate them from a president’s power to control executive officers under Article II of the US Constitution.
After the Supreme Court in 2018 ruled that the manner in which the SEC’s judge was appointed violated the constitution, the agency overturned the decision against Cochran and assigned her case to a new, correctly appointed judge.
A federal judge in Texas dismissed Ms. Cochran’s remark and found that the Securities Exchange Act deprived him of all authority to hear objections to ongoing SEC enforcement proceedings. The New Orleans-based 5th U.S. Circuit Court of Appeals did not agree, which revived the case, prompting President Joe Biden’s administration to appeal to the Supreme Court.