Supreme Court have struck down part of the anti-fraud law enacted in response
to the Enron and other corporate scandals from the early
2000s, but said its decision has limited consequences.
The justices voted 5-4 that the
Sarbanes-Oxley law enacted in 2002 violates the Constitution’s separation of
powers mandate. The court says the president, or other officials appointed by
him, must be able to remove members of a board that was created to tighten
oversight of internal corporate controls and outside auditors.
Congress created the board to
replace the accounting industry’s own regulators amid scandals at Enron Corp.,
WorldCom Inc., Tyco International Ltd. and other corporations. The board has
power to compel documents and testimony from accounting firms, and the
authority to discipline accountants.
Chief Justice John Roberts, writing
for the court, said that the Sarbanes-Oxley law will remain in effect with one
change. The Public Company Accounting Oversight Board will continue as before,
but the Securities and Exchange Commission now will be able to remove board members
That change, Roberts said, cures
the constitutional problem.