Key test for Sarbanes-Oxley before Supreme Court today
The Supreme Court today is hearing arguments in an opaque-sounding case called Free Enterprise Fund v. PCAOB that could end up having wide-ranging impact on Washington oversight of publicly traded corporations.
Without getting too far into the weeds, this case comes down to the Sarbanes-Oxley Act of 2002, which was rushed into law following the Enron and WorldCom scandals of the early part of this century. It enhanced or created new rules for U.S. corporations that include standards for the independence of corporate auditors, requiring chief executives to take personal responsibility for the efficacy of earnings reports and so on.
Proponents of the act said it was critical to restore investor confidence in the markets and companies. Opponents said it created another level of costly bureaucracy on companies in the U.S., setting them behind foreign rivals.
At issue today in the Supreme Court is the PCAOB, created by Sarbanes-Oxley, or SarbOx, or even SOX, as it's sometimes referred to.
The PCAOB is the Public Company Accounting Oversight Board, and it regulates auditors of publicly traded companies.
On the other side is the Free Enterprise Fund, an anti-tax group backed by economist Stephen Moore, a member of the Wall Street Journal's editorial board.
The Fund's case against the PCAOB: The Constitution requires that the members of the group be appointed by the president, not the SEC, as is the current case.
If the court sides with the Fund, it could lay the groundwork for dismantling SarbOx, which is what many business leaders have been cheering for -- and consumer investment advocates have been fearing -- for years.
-- Frank Ahrens
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December 7, 2009; 12:44 PM ET
Categories: The Ticker | Tags: Free Enterprise Fund, SarbOx, Sarbanes-Oxley, Stephen Moore
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