The SEC today paused implementation of the climate rules the agency rolled out less than one month ago, in the face of significant legal challenges in numerous federal lawsuits. The rules would impose substantial disclosure mandates on companies, including concerning the costs of extreme weather events, corporate strategies for addressing climate change, corporate governance procedures and, for many companies, greenhouse gas emissions.
The SEC proposed the rules two years ago and received voluminous comment letters, including many critical ones questioning the proposal's legality. In response, while the SEC withdrew proposals to require disclosure of emissions across a company's value chain and added some materiality qualifications, the final rules would continue to impose costly, expansive and controversial duties. The plaintiffs in the cases, including SEC registrants, say the final rules are beyond the SEC's statutory authority, that some would compel speech on controversial topics in violation of the First Amendment, and that the SEC failed to comply with certain provisions of the Administrative Procedure Act.
The first federal court to assess one of the lawsuits ordered the final rules stayed, but lifted that suspension when transferring the case to another circuit where all the cases are being heard on a consolidated basis. The plaintiffs that won the earlier stay were joined by plaintiffs from the other cases in requesting a renewal of the stay. In light of that action, the SEC announced its unilateral decision to suspend its rules. It explained its decision as appropriate amid a pending case to assure an orderly judicial and regulatory process. The agency took pains to say it continues to believe the rules are valid, to negate any suggestion that it acknowledges the seriousness of the legal challenges.
Read our client alert on the SEC Final Rule here.
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