Patrick McHenryChairman

Washington, November 30, 2021 -

Today, the top Republican on the House Financial Services Committee, Patrick McHenry (NC-10), and the top Republican on the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, Bill Huizenga (MI-02), sent a letter to Financial Services Committee Chairwoman Maxine Waters (CA-43) requesting she join Committee Republicans’ investigation of the Biden Administration’s attempt to politicize the Public Company Accounting Oversight Board (PCAOB). To date, Securities and Exchange Commission (SEC) Chair Gary Gensler has been unwilling to provide information to the Committee on a voluntary basis.

Subcommittee Ranking Member Huizenga also sent a letter to Chair Gensler demanding he clarify recent testimony to the Committee about the PCAOB’s independence.

Read the Republican Leaders’ full letter to Chair Waters here.

Read Excerpts from the letter to Chair Waters:

“Dear Madam Chair:

“In a closed meeting on Thursday, June 3, 2021, the SEC’s five commissioners voted 3-2 on partisan lines to remove Chairman William Duhnke from the Public Company Accounting Oversight Board (PCAOB). Committee Republicans obtained documents and information that indicate SEC Chair Gary Gensler and Commissioner Allison Herren Lee may have orchestrated a purge of the Board for partisan purposes. Indeed, on November 8, 2021, Chair Gensler announced four handpicked replacements, despite unresolved concerns about the process by which Gensler and Lee created vacancies at the PCAOB in the first place.

“In fact, rather than address those concerns in a transparent manner, the SEC refuses to produce any non-public records whatsoever. According to the agency’s lawyers, the SEC will not provide any additional records unless and until you endorse an outstanding request from Committee Republicans. In light of the seriousness of the allegations against Chair Gensler and Commissioner Lee, we respectfully urge you to join Committee Republicans in seeking answers from the SEC.

“On June 28, 2021, we issued letters to Chair Gensler and the Acting Chair of the PCAOB, Duane DesParte. You were copied on those letters. Committee Republicans requested specific documents and communications regarding the basis for the SEC’s decision to terminate Duhnke and replace the entire board. In response, the SEC provided a single document: a taxpayer-funded report prepared by Kalorama Legal Services (KLS) on PCAOB governance issues that had been withheld by the SEC since January 2021. The KLS report—which did not recommend the removal of Duhnke or any other Board member—raised more questions about how and why the SEC’s Democratic majority overhauled the PCAOB. The SEC subsequently advised our staff that the agency would not produce any further responsive documents.

…

“Since January 20, 2021, you have issued 17 statements to ‘applaud’ various actions by the Biden Administration. Meanwhile, you have not initiated a single investigation of any agency within the Committee’s jurisdiction. The Biden Administration appointees leading the SEC appear to have faith that you will similarly forego oversight in this case. In light of the SEC’s posture with respect to congressional oversight, we ask that you join this investigation, or delegate the Chair’s investigative authority to a subcommittee chairperson who is willing to do so. Thank you for considering this request.”

Read Subcommittee Republican Leader Huizenga’s full letter to SEC Chair Gensler here.

Read excerpts from the letter to Chair Gensler:

“Dear Chair Gensler:

“Following the Securities and Exchange Commission’s decision to remove Chairman William Duhnke III from the Public Company Accounting Oversight Board (PCAOB), you stated that ‘[t]he PCAOB has an opportunity to live up to Congress’s vision in the Sarbanes-Oxley Act.’ A key element of that vision is the PCAOB’s independence as an oversight body, both from the SEC and the industry it oversees. In fact, the words ‘independence’ and ‘independent’ appear at least ten times in the relevant portion of Sarbanes-Oxley, referring to everything from outside employment to funding sources. Senator Paul Sarbanes himself emphasized the importance of establishing the PCAOB, in statute, ‘to provide an extra guarantee of its independence.’ The SEC’s decision to co-opt the Board is clearly contrary to the intent of Congress.

“When you testified before the Committee on October 5, 2021, I raised concerns that the Commission’s decision to terminate Chairman Duhnke and solicit applications for all five Board seats would erode the PCAOB’s independence. In response to a question about whether Duhnke’s replacement will feel chilled because the SEC is looking over her shoulder, you stated that Congress intended for the SEC to review PCAOB standards and rules. Specifically, regarding the SEC scrutinizing the actions of the PCAOB Chair, you testified: ‘In fact I think, I think that’s what Congress put in place that all the standards of the rules of the PCAOB are reviewed by the SEC. That’s what the statute says that we’re supposed to do.’

…

“During the hearing, to better understand the scope of the SEC’s supervision of the PCAOB in the wake of Chairman Duhnke’s removal, I also asked if your office or the SEC’s Office of the Chief Accountant, specifically, has reviewed press releases or other materials from the PCAOB or its Board members before those materials were made public. You testified, ‘I don’t think it’s press release by press release’ and then proceeded to compare such an intrusive review to the statutory process by which the SEC reviews and approves PCAOB’s proposed rules. Of course, the Commission’s review and approval of PCAOB rules are significantly different than greenlighting PCAOB press releases. The former is a function Congress unequivocally required the Commission to perform given the consequence of PCAOB rulemakings, while the latter is not contemplated at all by the enacting statute. In fact, reviewing and approving routine PCAOB matters like press releases clearly violates Congress’s intent to create the PCAOB as a separate, independent entity.

“In hopes of clarifying your ambiguous response equating PCAOB press releases to PCAOB proposed rules, I further asked, ‘Have you systematically required the PCAOB to run things through your office before they are cleared?’ Again, you evaded the question by referring to the rulemaking process. You stated, ‘as it relates to the rule making and the standards there’s a process that goes forward.’

“My question to you is clear: since the SEC removed Chairman Duhnke on June 3, 2021, has your office or the SEC’s Office of the Chief Accountant ever reviewed press releases or other materials from the PCAOB or its Board members before those materials were made public? If so, please identify all such materials.”

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