A challenge to the much-reviled Sarbanes-Oxley legislation which first surfaced this Spring is getting the attention of the investment community.
Barron’s: THE LAST TIME A SUPREME COURT decision roiled the stock markets was December 13, 2000. Remember Bush versus Gore and the hanging chads?
This year, another High Court verdict has that potential. Plaintiffs in a blockbuster separation-of-powers case are challenging the constitutionality of the Public Company Accounting Oversight Board, a regulator created under the Sarbanes-Oxley Act passed in 2002 after the Enron scandal. The PCAOB oversees accounting firms that audit public companies.
If the Supremes find the PCAOB unconstitutional, look out below! Because Congress didn’t provide a way to address the PCAOB separately from Sarbanes-Oxley, the whole act could end up being viewed as unconstitutional by lower courts. Congress would then have to revisit the law, rather than crafting a fix specifically for the PCAOB.
Stocks initially might soar because Sarbanes-Oxley imposes significant costs on publicly traded companies. Afterwards, however, the markets might have second thoughts: Congress could make the law even tougher. Read the whole thing >
We’re not so sure about the “stocks initially might soar,” part. SarbOx does impose a marginal cost on public companies, though the real cost is on smaller, would-be public companies (and even that is disputable). Besides, given broad investor mistrust, it might even freak investors out if it’s perceived that the Supreme Court has given a greenlight to companies to get loose with their books.
The original petition for certiori is here (via ScotusBlog)
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