During the Gensler administration, the Securities and Exchange Commission (SEC) took a hard turn towards social issues (ESG) and away from its mandate of efficient markets, capital formation, and investor protection. In fact, little or nothing was done to support facilitating capital for both private and public firms during his tenure. One controversial rule that was approved, only to be challenged in the courts, was the SEC’s climate disclosure rule, which sought to impose new costs and arbitrary measurements on public firms. This burden would have inevitably spilled over into private markets as reporting companies would have compelled their suppliers to provide data on their impact to appease the rules.
Last week, the Commission, under the leadership of Acting Chairman Mark T. Uyeda, put the obtuse rules out to pasture, announcing that the SEC would no longer battle court actions challenging the rule. Uyeda stated:
“The goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”
The “detailed and extensive special disclosure regime about climate risks for issuing and reporting companies” would have inevitably become an enormous burden for firms, which would have passed on any costs to their customers.
The new Commission voted to withdraw its defense of the rules, and SEC counsel are no longer authorized to advance the arguments in the brief the Commission had filed.
Democrat aligned Commissioner Caroline Crenshaw dissented with the decision, claiming the Commission was unlawfully dismantling the rule, claiming they were taking shortcuts. Crenshaw was a Commissioner who supported the climate rule.
The Investors Choice Advocate Network (ICAN) submitted a friend-of-the-court brief challenging the SEC’s authority in regulating climate disclosure. The document highlights how the Gensler administration had clearly stretched the SEC’s authority.
