Sarbanes-Oxley will be hit with court challenges next year. So says the conservative limited government group, the Free Enterprise Fund. The warning comes in a piece that examines the two lawsuits that have been filed against the Securities and Exchange Commission.

One is a suit by the US Chamber of Commerce over the SEC's proposed rule mandating that mutual fund board chairmen be independent of management. The second concerns the SEC rule requiring hedge funds to register with the agency. There's a view in the SEC that these loosely regulated investment pools are breeding grounds for fraud and investment abuse.

Of course, the hedge funds are fighting hard to stop what other investment vehicles are required to do as a matter of course. They argue that they are held accountable by their investors. But as Alan Murray points out in the Wall Street Journal , there have been enough hedge fund blowups to suggest their investors have been pretty slack on the old due diligence. The irony, as Murray says, is that hedge funds work by poring over public records that companies are forced to file but they are not having a bar of that themselves. He says hedge funds are the "new sheriffs of the board rooms".

"While Sarbanes-Oxley forced companies to play defense, hedge funds force them to play offense. Any risk-averse company that wants to sit on a big pile of cash waiting for a rainy day is likely to find itself under quick attack from these fast-moving pools of money that will come in, buy up stock, and agitate for change...But they are less concerned with legal processes and accounting procedures and more with returns to shareholders.''

The fundamental issue here is accountability. Do we need more of it? Or is the law hurting entrepreneurialism? It's a matter the courts are likely to be thrashing out for years to come.