|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
Anybody Up For a Change Of SOX?
Jill "J.R." Labbe - Fort Worth Star-Telegram (TX)
Securities Mosaic. November 26, 2006
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EXCERPT: Who knows whether the new Congress will find the time or the interest to revisit SOX, which Butler [Henry Butler, the James Farley professor of economics at Chapman University's Argyros School of Business and Economics] labeled a "litigation time bomb." But he hopes that a lawsuit filed jointly in February by the Free Enterprise Fund and Beckstead & Watts, an accounting firm based in Nevada, will act to light the fuse. The lawsuit hinges on two points. It claims that the Public Company Accounting Oversight Board, created by Congress under SOX to oversee the auditing of U.S. business, exercises wide-ranging governmental power with minimal oversight -- a violation of the Constitution's separation of powers. The suit also contends that the appointment of PCAOB members by the Securities and Exchange Commission violates the Constitution's appointments clause. That clause gives the president the power to appoint the nation's top officers. The low-ranking ones are to be picked by the president, a court or a single head of a Cabinet-level department. The SEC's five commissioners don't fall under any of those definitions. If the court agrees, the entire act could go down because it doesn't have a severability clause. It's no surprise that the Free Enterprise Fund is joined by the Competitive Enterprise Institute and the American Enterprise Institute, which published the Butler-Ribstein book, in thinking that Sarbanes-Oxley needs to be trashed. The likelihood of a wholesale scrapping of the act is somewhere between slim and nil -- federal lawmakers, like most powerful people, rarely admit to mistakes. But they could save face by admitting that even our nation's founding document has been made stronger by judicious amendments. As Butler said while in Fort Worth, the economic cost of SOX could be reduced if it exempted all but the largest U.S. corporations and dual-listed securities of foreign corporations. As his book concludes, "SOX should teach us to respond to fraud in a more measured way, with regulation that works with, rather than against, markets." |
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