Supreme Court Ruling Forces Minor Changes to Sarbanes-Oxley
A Supreme Court ruling today on the case Free Enterprise Fund v. Public Company Accounting Oversight Board will force some minor changes to the Public Accounting Oversight Board created by the Sarbanes-Oxley Act. The narrowly-focused ruling, based on separations of powers, found that the law as written by Congress unduly restricted the president in hiring and firing board members of the PCAOB.
The high court, in a 5-4 opinion by Chief Justice John Roberts, found fault with some parts of the Public Company Accounting Oversight Board, which was created as part of the act in the wake of collapses at Enron and WorldCom.
Congress had given the five-member board, a not-for-profit corporation, broad regulatory authority over accounting firms that audit publicly traded companies.
Justice Roberts said the structure of the accounting board violated constitutional separation-of-powers principles because it was too difficult for the president to remove board members.
“The president cannot take care that the laws be faithfully executed if he cannot oversee the faithfulness of the officers who execute them,” Justice Roberts wrote.
Justice Roberts said Sarbanes-Oxley “remains fully operative as a law.” He said the unconstitutional provisions governing the board could be severed from the rest of the law.
Justice Roberts said the Securities and Exchange Commission will now have the authority to remove board members at will. Previously, the SEC could only remove members for good cause.
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