SEC Ousts Head of Top Audit Regulator Amid Warren Pressure

(Bloomberg) -- The Securities and Exchange Commission, led by Chairman Gary Gensler, has fired the U.S.’s top accounting regulator, a move that is certain to please investor advocates and progressives who had demanded an overhaul of the watchdog.

The SEC announced the removal of Public Company Accounting Oversight Board Chairman William Duhnke in a Friday statement. He was replaced on an acting basis with PCAOB board member Duane DesParte.

The change was approved in a vote by Gensler and the SEC’s politically-appointed commissioners. The agency, which currently has three Democratic members and two Republicans, didn’t release a tally. The two GOP commissioners released a statement opposing Duhnke’s termination.

Duhnke’s critics argued that he had mismanaged the regulator and was too friendly to accounting firms. An ex-long-time aide to Republican Senator Richard Shelby, he was appointed when the SEC was led by former Chairman Jay Clayton.

A PCAOB spokeswoman referred a request for comment on Duhnke’s removal to the SEC.

Gensler’s decision will likely inflame partisan squabbling about the PCAOB, a quasi-governmental regulator that is little known outside of Washington. Congress created the PCAOB through the 2002 Sarbanes-Oxley Act in the aftermath of accounting scandals involving Enron Corp. and WorldCom Inc., though Democrats and Republicans have long fought over its leadership and role in policing auditing firms.

Duhnke’s fate may have been sealed last month when Senators Elizabeth Warren and Bernie Sanders called on Gensler to immediately replace the entire PCAOB board, alleging that the Trump administration had weakened the regulator.

In a joint statement, Republican SEC Commissioners Hester Peirce and Elad Roisman said the way in which Duhnke was terminated is “unprecedented,” while adding that it risks politicizing what was meant to be an independent watchdog.

“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,” Peirce and Roisman said.

GOP lawmakers also ripped the move, arguing Gensler was inappropriately doing Warren’s bidding.

“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,” said Representative Patrick McHenry, the top Republican on the House Financial Services Committee.

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