Federal appeals court hears challenge to Sarbanes-Oxley oversight board Caitlin Price at 4:00 PM ET
[JURIST] A three-judge panel in the US Court of Appeals for the District of Columbia Circuit heard arguments Tuesday regarding the constitutionality of a private body established by Congress to oversee accounting practices in publicly traded companies. In 2006, conservative business organization Free Enterprise Fund challenged [JURIST report] provisions in the Sarbanes-Oxley Act of 2002 [PDF text] establishing the Public Company Accounting Oversight Board (PCAOB) [official website], alleging that it violates the separation of powers doctrine. In 2007, the District Court for the District of Columbia granted summary judgment [opinion, PDF] in favor of the PCAOB, finding that the plaintiffs' facial challenge failed to establish that no set of circumstances could exist under which the Act would be valid. The five-member PCAOB board is appointed and overseen by the Securities and Exchange Commission (SEC) [official website]; plaintiffs argued Tuesday that the board is outside of presidential control and endowed with too much unchecked prosecutorial and police power. The US Department of Justice, arguing for the government, said that scrutiny from the presidentially appointed SEC is sufficient to render the board constitutional.
Consistent with the overall purpose of Sarbanes-Oxley, the PCAOB board was created in response to the collapse of Enron and the other corporate fraud scandals [JURIST news archives] that made headlines in 2002. Dow Jones has more.
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