The US Supreme Court today (June 28) issued a ruling that has been eagerly anticipated (details at http://www.nytimes.com/2010/06/29/business/29accounting.html?hp).  The case is related to the constitutionality of the PCAOB (Public Company Accounting Oversight Board), which was created as part of the 2002 Sarbanes-Oxley Act (SOX) to help fight future corporate accounting scandals after the Enron and WorldCom downfalls.  The challenge to this element of SOX left the entire law at risk because in the wording of the law, the invalidation of any part of it potentially invalidated the entire law.   This section of SOX was being challenged on the basis of separation of powers, in that it was claimed that the powers of this board were too broad, and that it was too difficult for the President to actually remove members of the board.

The Court agreed with this claim of those who filed the suit originally.   However, they also ruled that the charter and operation of the board could be separated from the rest of the SOX law itself.  Therefore, the mere existence of the board was not unconstitutional.  And, most importantly, Justice Roberts stated that Sarbanes-Oxley "remains fully operative as a law."

It seems likely to me that political reality entered somewhat into this decision.  If the Court had invalidated the existence of the PCAOB, and therefore essentially thrown out the entire SOX law, the impact could have been significant.   Entire careers and market niches have been built around SOX compliance, not to mention all the products that have been built to address this market.  And, possibly even worse, the whole movement towards regulation might have suffered a setback.  However you might think of SOX, there are clearly some important benefits of mandates such as HIPAA, GLBA, PCI, and many others.  I for one would hate to see those benefits disappear due to a headlong rush to combat regulations on philosophical grounds.

In comparison to how they might have ruled, this Court ruling is very good news.