And so the US Supreme Court has finally given its ruling on whether Sarbanes-Oxley is unconstitutional. And reading it through, you would have to say that the Supremes are sitting on the fence.
The Free Enterprise Fund, a free-market pressure group, had filed a lawsuit claiming that SOX violates the separation-of-powers mandate under the US constitution. The argument goes that the Sarbanes-Oxley legislation, passed in the wake of the Enron and WorldCom scandals, creates a body that regulates the accounting industry, the Public Company Accounting Oversight Board (PCAOB), without giving the president power to appoint the members of the body.
That's the kind of stuff lawyers love to talk about but it's also important. If the Supreme Court agreed with the free marketers, it would have thrown out the law which governs US business.
The Supremes seemed to agree that the PCAOB creates constitutional problems. They said the PCAOB members were "substantially insulated" from the control of the Securities and Exchange Commission which "cannot remove Board members at will, but only 'for good cause shown' ". They argued that the executive branch, in the form of the SEC, must be able to remove PCAOB members. So in effect, the law remains in place which is a blow to the Free Enterprise Fund but board members can be removed.
Writing in the New York Times DealBook, legal commentator Peter Henning suggests the ruling is, more or less, academic. "The likelihood one of its (PCAOB) members would be removed by the SEC is virtually nonexistent, and its oversight and enforcement powers continue undisturbed. Similarly, the Sarbanes-Oxley Act remains fully in force beyond the narrow constraint on removal of a board member that is no longer operative. The opinion will doubtlessly be of great interest to constitutional scholars for its treatment of the president's removal power and how Congress can structure subordinate independent agencies. For the SEC, the accounting oversight board and the accounting industry, however, those issues are of little relevance to their continuing operations, and the decision will be little more than a footnote for Wall Street and Main Street".
The decision leaves open the possibility of Congress amending Sarbanes-Oxley. But in this business climate where governments are coming out with more regulation, not less, that's unlikely to happen. As Henning says, it's just footnote for accounting, corporate governance and business in the US.
no comment untill now