WASHINGTON — The Supreme Court on Monday left intact the centerpiece of the Sarbanes-Oxley Act while ruling that the executive branch should have more authority over members of the Public Company Accounting Oversight Board.
The 5-4 decision said the 2002 law passed in response to accounting frauds at Enron and WorldCom didn’t give the president enough say over the board created by the act. The Securities and Exchange Commission must have unfettered power to fire the board’s chairman and members for it to adhere to separation-of-powers provisions in the Constitution, the high court ruled.
“No one doubts Congress’s power to create a vast and varied federal bureaucracy,” Chief Justice John Roberts wrote in the majority decision. “But where, in all this, is the role for oversight by an elected president?”
Concern that the court would issue a more sweeping ruling had prompted the SEC to put together contingency plans to take over some of the accounting board’s duties if it were dissolved. The decision gives the SEC broader authority to remove members without requiring further action by regulators or lawmakers, said Christopher Bartolomucci, a partner at Hogan Lovells in Washington.
“The effect of the court’s decision is quite limited,” he said. “The board will continue to exist, and its regulatory powers will be the same.”
SEC Chairman Mary Schapiro, in a statement, said she was “pleased that the court has determined that the board’s operations may continue.”
