SEC Joins Sarbox Constitutionality Defense

Lora Bentley

Late last week the controversy over Sarbanes-Oxley's constitutionality reared its head again -- not that it had ever gone away, of course. The Securities and Exchange Commission has joined the Department of Justice in a brief supporting the Public Company Accounting Oversight Board's defense of a lawsuit filed by the Free Enterprise Fund early this year.


From what we've read, most recently in a article, the Free Enterprise Fund alleges that Sarbanes-Oxley violates the separation of powers principle of the U.S. Constitution to the extent that the PCAOB, which Sarbox establishes, is not subject to checks and balances from the other branches of government.


Moreover, the PCAOB violates the Appointments Clause, FEF argues, in that its members are not appointed or subject to removal by the president.


In response, the DOJ and the SEC counter that the Act, "taken as a whole," does not undermine the authority of the Executive Branch or shift the balance of power as it currently exists.

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