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Supreme Court Strikes Down Part of Sarbanes-Oxley

37 points by wheels 16y ago

cscotta 16y ago
Around page 28-29, you'll find the Court's opinion on Sarbanes-Oxley and its future. In short, it appears they strike down a provision that allows the executive branch to remove a member from the board of directors, leaving the rest of the law intact. Apologies in advance, and please correct me - I'm neither a lawyer or an expert on Sarbox. [Edit: See comment below by kgrin] This seems to be the most relevant portion of the decision (viewable in full here: http://www.scribd.com/doc/33661051/Supreme-Court-Ruling-on-Sarbanes-Oxley http://www.scribd.com/doc/33661051/Supreme-Court-Ruling-on-S...). From pages 28-29, with citations removed for readability: --- "We reject such a broad holding. Instead, we agree with the Government that the unconstitutional tenure provisions are severable from the remain der of the statute. “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,” severing any “problematic portions while leaving the remainder intact.” "Because “[t]he unconstitutionality of a part of an Act does not necessarily defeat or affect the validity of its remaining provisions,” ... the “normal rule” is “that partial, rather than facial, invalidation is the required course”. Under the traditional default rule, removal is incident to the power of appointment. Concluding that the removal restrictions are invalid leaves the Board removable by the Commission at will, and leaves the President separated from Board members by only a single level of good-cause tenure. The Commission is then fully responsible for the Board’s actions, which are no less subject than the Commission’s own functions to Presidential oversight. The Sarbanes-Oxley Act remains “‘fully operative as a law’” with these tenure restrictions excised. We therefore must sustain its remaining provisions “[u]nless it is evident that the Legislature would not have enacted those provisions independently of that which is [invalid].” Ibid. ---
- kgrin 16y ago
  It's not a company's board of directors - it's the Public Company Accounting Oversight Board, a regulatory body established by Sarbanes-Oxley "to oversee the auditors of public companies in order to protect the interests of investors..." In short, it's a pretty inconsequential ruling relative to the meat of the law.
- gojomo 16y ago
  they strike down a provision that allows the executive branch to remove a member from the board As with another sibling comment, you've got it exactly backwards. The Court struck down a clause that limited the ability of the President/SEC to remove members. The President now has greater discretion, not less.
  - warmfuzzykitten 16y ago
    No, the SEC has greater discretion. The President's authority, as before, is limited to removing the head of the SEC and he can only do this for good cause.
rbranson 16y ago
EDIT: As pointed out by replies, I apparently lack reading comprehension skills. Thanks to reply: tl;dr: The SEC no longer requires good cause to remove oversight board members any more, and the President's power is essentially unchanged.
- wheaties 16y ago
  Thanks. I don't speak the same English that is found within those legal documents.
  - kgrin 16y ago
    That's because it's not really meant to be "English"; think of it as a DSL for the law.
    - jesselamb 16y ago
      I have the hardest time conveying to some clients that legal documents are more like code than prose. I'll try the analogy of a DSL with my dev clients. Thanks.
      - daeken 16y ago
        The analogy of a DSL isn't really an analogy -- it is a DSL. Legalese is a subset of English gramatically speaking, but the entire goal is to minimize ambiguity as much as possible. It really is a DSL.
  - protomyth 16y ago
    its really more of a programming language than English these days
- deleted 16y ago
  [deleted]
- zamfi 16y ago
  Wait, isn't this almost the opposite of what the article states? I read it as saying that the ruling removed the restriction that SOX Public Company Accounting Oversight Board members could only be removed for good cause. In other words, it's now easier for those board members to be removed, as the SEC can just remove them at will. I haven't read the actual text of the ruling; is the article inconsistent with it?
gojomo 16y ago
Accurate tl;dr: Supreme Court says President's chosen SEC has discretionary power to remove members from a Sarbox-created accounting board for any reason; the prior restriction to remove members only for "good cause" was unconstitutional. edit: changed "President/SEC" to "President's chosen SEC"; it does not appear they said the President has direct discretionary power to remove board members, even though the SEC's power was described in terms of executive/presidential powers.
aditya 16y ago
For everyone saying that this is a pretty inconsequential ruling: The ruling leaves it to Congress to re-establish the panel with tighter oversight, potentially setting up a new legislative fight that might sweep in other aspects of Sarbanes-Oxley. via http://www.businessweek.com/news/2010-06-28/sarbanes-oxley-audit-board-unconstitutional-top-court-says.html http://www.businessweek.com/news/2010-06-28/sarbanes-oxley-a... Note, however, that the original source seems to have been "corrected": http://www.bloomberg.com/news/2010-06-28/sarbanes-oxley-audit-board-declared-unconstitutional-by-u-s-supreme-court.html http://www.bloomberg.com/news/2010-06-28/sarbanes-oxley-audi...
jrockway 16y ago
But the most important parts were not struk down. I am still legally not allowed to chat with my coworkers over IRC, or use an internal nopaste service to discuss code snippets over chat. There's a reason why free software is better than the stuff developed at big companies -- the government doesn't tell them what tools they can and cannot use.
- DLWormwood 16y ago
  I’m not saying I don’t believe you (laws like this are famous for accidental side effects), but I’m having a hard time understanding how a law targeted towards business management executives regarding financial accounting can impact labor level productivity. Care to elaborate?
  - jrockway 16y ago
    Any communication between employees must be archived and stored in some super-special repository. Any tool that doesn't store its data in said super-special repository is a crime to use. I'm surprised we don't have to record our in-person chats with a wearable video camera.
    - mburns 16y ago
      Do these super-special repositories have a decent API?
      - patio11 16y ago
        This type of tool puts the capital E in Big Freaking Enterprise. Not only do they not have decent APIs, to the extent that they do have APIs at all they're written in whatever the best practice was for Java architecture astronauts 10 years ago (I say that with as much love as I can muster, having been one), and the API is not laid out according to programmer utility but rather according to ossification of business practice and/or the whims of twenty-something Congressional staffers who would not know a program if it bit their Blackberry. Basically, it is the same story as almost all enterprise software: abandon all hope ye who enter here.
ngerakines 16y ago
This is a painfully misleading title.
mattmaroon 16y ago
That title change is totally misleading. They not only upheld it but actually strengthened it quite a bit. The part they struck down was a built in check on the power of the SEC.

37 points by wheels 16y ago

Around page 28-29, you'll find the Court's opinion on Sarbanes-Oxley and its future. In short, it appears they strike down a provision that allows the executive branch to remove a member from the board of directors, leaving the rest of the law intact. Apologies in advance, and please correct me - I'm neither a lawyer or an expert on Sarbox. [Edit: See comment below by kgrin] This seems to be the most relevant portion of the decision (viewable in full here: http://www.scribd.com/doc/33661051/Supreme-Court-Ruling-on-Sarbanes-Oxley http://www.scribd.com/doc/33661051/Supreme-Court-Ruling-on-S...). From pages 28-29, with citations removed for readability: --- "We reject such a broad holding. Instead, we agree with the Government that the unconstitutional tenure provisions are severable from the remain der of the statute. “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,” severing any “problematic portions while leaving the remainder intact.” "Because “[t]he unconstitutionality of a part of an Act does not necessarily defeat or affect the validity of its remaining provisions,” ... the “normal rule” is “that partial, rather than facial, invalidation is the required course”. Under the traditional default rule, removal is incident to the power of appointment. Concluding that the removal restrictions are invalid leaves the Board removable by the Commission at will, and leaves the President separated from Board members by only a single level of good-cause tenure. The Commission is then fully responsible for the Board’s actions, which are no less subject than the Commission’s own functions to Presidential oversight. The Sarbanes-Oxley Act remains “‘fully operative as a law’” with these tenure restrictions excised. We therefore must sustain its remaining provisions “[u]nless it is evident that the Legislature would not have enacted those provisions independently of that which is [invalid].” Ibid. ---

kgrin 16y ago
It's not a company's board of directors - it's the Public Company Accounting Oversight Board, a regulatory body established by Sarbanes-Oxley "to oversee the auditors of public companies in order to protect the interests of investors..." In short, it's a pretty inconsequential ruling relative to the meat of the law.
gojomo 16y ago
they strike down a provision that allows the executive branch to remove a member from the board As with another sibling comment, you've got it exactly backwards. The Court struck down a clause that limited the ability of the President/SEC to remove members. The President now has greater discretion, not less.
- warmfuzzykitten 16y ago
  No, the SEC has greater discretion. The President's authority, as before, is limited to removing the head of the SEC and he can only do this for good cause.

rbranson 16y ago

EDIT: As pointed out by replies, I apparently lack reading comprehension skills. Thanks to reply: tl;dr: The SEC no longer requires good cause to remove oversight board members any more, and the President's power is essentially unchanged.

wheaties 16y ago
Thanks. I don't speak the same English that is found within those legal documents.
- kgrin 16y ago
  That's because it's not really meant to be "English"; think of it as a DSL for the law.
  - jesselamb 16y ago
    I have the hardest time conveying to some clients that legal documents are more like code than prose. I'll try the analogy of a DSL with my dev clients. Thanks.
    - daeken 16y ago
      The analogy of a DSL isn't really an analogy -- it is a DSL. Legalese is a subset of English gramatically speaking, but the entire goal is to minimize ambiguity as much as possible. It really is a DSL.
- protomyth 16y ago
  its really more of a programming language than English these days
deleted 16y ago
[deleted]
zamfi 16y ago
Wait, isn't this almost the opposite of what the article states? I read it as saying that the ruling removed the restriction that SOX Public Company Accounting Oversight Board members could only be removed for good cause. In other words, it's now easier for those board members to be removed, as the SEC can just remove them at will. I haven't read the actual text of the ruling; is the article inconsistent with it?

gojomo 16y ago

Accurate tl;dr: Supreme Court says President's chosen SEC has discretionary power to remove members from a Sarbox-created accounting board for any reason; the prior restriction to remove members only for "good cause" was unconstitutional. edit: changed "President/SEC" to "President's chosen SEC"; it does not appear they said the President has direct discretionary power to remove board members, even though the SEC's power was described in terms of executive/presidential powers.

aditya 16y ago

For everyone saying that this is a pretty inconsequential ruling: The ruling leaves it to Congress to re-establish the panel with tighter oversight, potentially setting up a new legislative fight that might sweep in other aspects of Sarbanes-Oxley. via http://www.businessweek.com/news/2010-06-28/sarbanes-oxley-audit-board-unconstitutional-top-court-says.html http://www.businessweek.com/news/2010-06-28/sarbanes-oxley-a... Note, however, that the original source seems to have been "corrected": http://www.bloomberg.com/news/2010-06-28/sarbanes-oxley-audit-board-declared-unconstitutional-by-u-s-supreme-court.html http://www.bloomberg.com/news/2010-06-28/sarbanes-oxley-audi...

jrockway 16y ago

But the most important parts were not struk down. I am still legally not allowed to chat with my coworkers over IRC, or use an internal nopaste service to discuss code snippets over chat. There's a reason why free software is better than the stuff developed at big companies -- the government doesn't tell them what tools they can and cannot use.

DLWormwood 16y ago
I’m not saying I don’t believe you (laws like this are famous for accidental side effects), but I’m having a hard time understanding how a law targeted towards business management executives regarding financial accounting can impact labor level productivity. Care to elaborate?
- jrockway 16y ago
  Any communication between employees must be archived and stored in some super-special repository. Any tool that doesn't store its data in said super-special repository is a crime to use. I'm surprised we don't have to record our in-person chats with a wearable video camera.
  - mburns 16y ago
    Do these super-special repositories have a decent API?
    - patio11 16y ago
      This type of tool puts the capital E in Big Freaking Enterprise. Not only do they not have decent APIs, to the extent that they do have APIs at all they're written in whatever the best practice was for Java architecture astronauts 10 years ago (I say that with as much love as I can muster, having been one), and the API is not laid out according to programmer utility but rather according to ossification of business practice and/or the whims of twenty-something Congressional staffers who would not know a program if it bit their Blackberry. Basically, it is the same story as almost all enterprise software: abandon all hope ye who enter here.

ngerakines 16y ago

This is a painfully misleading title.

mattmaroon 16y ago

That title change is totally misleading. They not only upheld it but actually strengthened it quite a bit. The part they struck down was a built in check on the power of the SEC.