A strong case for why Sarbanes-Oxley should be found unconstitutional
The question posed by the case, Free Enterprise Fund and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board et al., had nothing to do with whether the auditing requirements and increased criminal liability and penalties of Sarbanes-Oxley have hurt our public companies, and, by extension, every American with a stock portfolio or a pension plan. The issue is whether Sarbanes-Oxley's creation of an agency to police auditors of public companies violated the doctrine of separated powers.
The chief constitutional problem with the law is that the five board members at this new agency — the Public Company Accounting Oversight Board of the suit's caption — aren't appointed by the president. Nor can the president fire them. Instead the commissioners of the Securities and Exchange Commission, who are presidential appointees, get to do the hiring and firing for the new Oversight Board. And the firing can only be for cause.
The result is a regulatory agency whose top officials — unlike those in the SEC, Justice Department, and Treasury Department — are well insulated from the elected leader of the executive branch. It's as though Congress wanted to add to the judicial, legislative, and executive branches, a new independent branch of government: the auditors. . . .