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White Waits on PCAOB Pick

SEC Chair Mary Jo White said the financial market regulator should wait until two nominees for seats on the commission are in place before considering whether to renew PCAOB Chairman James Doty’s term, which ended in October 2015. The Senate has yet to confirm the two candidates, and it is unclear when the SEC, which is functioning with three commissioners instead of its full complement of five, will be prepared to make a decision.

SEC Chair Mary Jo White said the commission will not consider whether to renew PCAOB Chairman James Doty’s term until the two nominees awaiting Senate confirmation are sworn in.

“The appointment or reappointment process is one that I think should be left to the full commission,” SEC Chair Mary Jo White said in response to a question byAccounting & Compliance Alert on February 19, 2016. “In the meantime, Chairman Doty, the PCAOB board, the staff are carrying out their duties and critical mission quite well without missing a beat.”

White was briefly answering questions from reporters after giving a keynote speech at the Practising Law Institute’s SEC Speaks conference in Washington.

“The SEC has always been at its full complement when appointing a chair or even an acting chair of the PCAOB,” White added.

The SEC has been functioning with three commissioners instead of its full complement of five since Luis Aguilar left at the end of December and Daniel Gallagher left in October.

President Barack Obama in October nominated Lisa Fairfax, a professor at George Washington University Law School since 2009 to fill Aguilar’s seat, and Hester Peirce, the director of the Financial Markets Working Group at the Mercatus Center at George Mason University since 2012 to replace Gallagher. Peirce previously was a staffer to Senator Richard Shelby, chairman of the Senate Banking Committee.

But the Banking Committee, which would hold the confirmation hearing, has yet to move on the nominees. A panel spokesperson did not respond to request for comment about when the hearing will take place as this story was being written.

Senator Shelby previously wanted the hearings wrapped up by Thanksgiving, but politics may have derailed that plan. He is up for reelection and reportedly focused on the state Republican primary on March 1.

Nonetheless, some observers were skeptical about the need to wait for a decision. In September, White said important rulemaking decisions can be made without the full complement of commissioners.

“The SEC could have made the appointment last fall when there were five commissioners,” former SEC Chief Accountant Lynn Turner said. “It is unfortunate the chair has chosen to string along Mr. Doty and treat him or anyone else in this fashion.”

In addition, even if Peirce and Fairfax are sworn in relatively soon, their arrival at the SEC may drag out the selection process. The SEC’s procedures for PCAOB appointments or reappointments allow new commissioners the opportunity to recommend candidates, and the rest of the commission would have to consider them. Each step will inevitably delay the decision.

The wait for a decision comes as investor advocates, some former regulators, and prominent accounting professors have been urging White to reappoint Doty. (See Pressure on Chair White Continues as Decision on PCAOB’s Leadership Awaits in the November 4, 2015, edition of Accounting & Compliance Alert .) Doty was originally appointed PCAOB chairman in February 2011 by White’s predecessor at the SEC, Mary Schapiro. His term ended in October 2015, but he is eligible for reappointment to a second five-year term.

The SEC has also reportedly been considering PCAOB member Lewis Ferguson and William Duhnke, a Republican staffer on the Senate Banking Committee, to replace Doty.

Doty has been very popular among investors because of his support for an agenda aimed at bringing more accountability and independence to the auditing profession. But his tenure has also been criticized by SEC Chief Accountant James Schnurr, who has direct oversight of the PCAOB and is expected to advise White and the other commissioners about the appointment.

The PCAOB had no comment.