New York City The Supreme Court on Monday unanimously rejected a challenge to the constitutionality of the 2002 Sarbanes-Oxley law. Although it ordered a change in oversight of the accounting watchdog created by the law, the court left the rest of the 2002 law intact.
In its ruling, the court turned aside a broad challenge to one part of the law, which established the Public Company Accounting Oversight Board, to regulate the accounting industry. In a 5-to-4 split, the court found that the way members of the oversight board could be removed was unconstitutional. As a result of the decision, the Securities and Exchange Commission, which appoints the five members of the board, will now be able to remove members at will, rather than only if there is good cause.
The change is not likely to have a major impact on companies, according to various experts.
"The Sarbanes-Oxley Act dodged a bullet and victory can be declared by the PCAOB and the proponents of Sarbanes-Oxley," said Jim Cox, a securities professor at the Duke University School of Law, in a Reuters report.