A New Mutual Assistance Agreement; A Challenge to PCAOB Rejected

Australian agreement: The SEC announced another mutual recognition agreement on Monday, this time with the Australian Minister for Superannuation and Corporate Law and the Australian Securities and Investments Commission (“ASIC”). Under the terms of the mutual recognition agreement, the SEC and the Australian authorities agreed to consider giving exemptions to exchanges and securities brokers in their respective countries. Pursuant to this arrangement, U.S. brokers may be able to offer their services, subject to conditions, in Australia. The converse may also be true.

A key facet of the arrangement is an Enhanced Enforcement Memorandum of Understanding and a new Supervisory MOU. These agreements will allow for greater regulatory and enforcement cooperation between the SEC and the ASIC.

The SEC has frequently utilized international agreements to facilitate its enforcement investigations. This is particularly true in the insider trading areas where the Commission has had success bringing a number of cases involving trading in the U.S. securities markets from outside the country as discussed here.

As the same time the Australian markets have a less than favorable reputation among the local business community. Recent reports, discussed here, suggest that insider trading is so rampant as to be almost common place thus undermining confidence in those markets.

PCAOB: Last week, the D.C. Circuit rejected a constitutional challenge to the PCAOB, created as part of the Sarbanes Oxley Act. Free Enterprise Fun and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board, No. 07-527 (D.C. Cir. Aug. 22, 2008). In a two to one decision, the court rejected a facial claim to the statute alleging that it violated the constitutional appointment power of the President and separation of powers because it does not permit adequate Presidential control of the PCAOB. Rather, Congress made the Board’s exercise of its duties subject to what the court called “comprehensive control” by the SEC. In reaching its decision, the court upheld a grant of summary judgment by the district court in favor of the Board.