A visiting school group walks along the plaza at the U.S. Supreme Court on Capitol Hill in Washington, U.S., February 22, 2022.
A visiting school group walks along the plaza at the U.S. Supreme Court on Capitol Hill in Washington, U.S., February 22, 2022. Reuters / TOM BRENNER

The U.S. Supreme Court on Monday agreed to hear the Securities and Exchange Commission's bid to block a challenge to the constitutionality of its in-house tribunal brought by a Texas accountant who the agency punished after faulting her audits of publicly traded companies.

The justices took up the SEC's appeal of a lower court ruling that revived certified public accountant Michelle Cochran's challenge. The lower court rejected the agency's argument that under a U.S. law called the Securities Exchange Act Cochran could not contest the constitutionality of the tribunal's judges in federal court before the end of the SEC's administrative enforcement proceeding against her.

Cochran's case is similar to one involving Taser manufacturer Axon Enterprise Inc, which is contesting an antitrust action against it by another federal agency, the Federal Trade Commission. The Supreme Court in January agreed to hear Axon's appeal of a lower court ruling that threw out its challenge to the constitutionality of the FTC's structure.

An SEC judge in 2017 had found that Cochran failed to comply with auditing standards in violation of the Securities Exchange Act, fining her $22,500 and banning her from practicing as an accountant before the commission for five years. The SEC cited deficiencies in her audits of publicly traded companies.

Cochran sued the SEC in 2019 to stop the enforcement action against her, arguing that its in-house judges, who enforce investor protection laws and regulations, have job protections that unlawfully insulate them from a president's power to control executive branch officers under the U.S. Constitution's Article II.

After the Supreme Court in 2018 ruled that the way the SEC's judges were appointed violated the Constitution, the agency set aside the decision against Cochran and assigned her case to a new, properly appointed judge.

A federal judge in Texas threw out Cochran's challenge, finding that the Securities Exchange Act stripped him of any power to hear challenges to ongoing SEC enforcement proceedings. The New Orleans-based 5th U.S. Circuit Court of Appeals disagreed, reviving the case, prompting President Joe Biden's administration to appeal to the Supreme Court.