Sarbanes-Oxley takes minor hit in Supreme Court ruling

The Supreme Court ruled yesterday on a challenge to the Sarbanes-Oxley Act (SOX), the 2002 law that defined rules and regulations for financial reporting by publicly traded companies. The ruling, however dealt only with a very small part of the law concentrating on who can appoint members to the Public Company Accounting Oversight Board (PCAOB), a body enacted to oversee the SOX enforcement. The law as enacted by Congress gave the SEC this power, but the court ruled that only the president should have the authority to make such appointments.

Russell Berman writing for The Hill wrote:

"In the Sarbanes-Oxley case, the Supreme Court ruled that Congress essentially overreached when it tried to craft a regulatory agency with enough independence to shield it from political influence."

Craig Carpenter, VP of marketing at eDiscovery software vendor Recommind says the ruling was extremely narrow in its focus. "The impact will be a relatively minor adjustment to SOX; not insignificant, but the PCAOB (and SOX) will live on. That is the real significance here, that SOX (and PCAOB) had a 'near miss' as they both could have been overturned, which would have forced Congress to revisit the whole topic."

Carpenter adds, Sarbanes-Oxley (and by extension all similar regulations) dodged a bullet with yesterday's ruling. "If [The Supreme Court] had issued a harsher ruling, i.e. that PCAOB and/or SOX were unconstitutional in either’s entirety, this would have had major ramifications for a bunch of other efforts currently underway, such as financial reform, healthcare reform, etc."

For more information:
- see this article from IDG News Service

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