You might recall that, on Halloween, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the Share Repurchase Disclosure Modernization rule. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that “there is at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court decided that, instead of vacating the rule, it would allow the SEC 30 days “to remedy the deficiencies in the rule,” and remanded the matter with directions to the SEC to correct the defects in the rule. The three-judge panel, however, “retain[ed] jurisdiction to consider the decision that is made on remand.” The deadline was set at November 30, 2023. On Wednesday before Thanksgiving, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule. As a result, the rule was stayed pending further SEC action. (See this PubCo post.) Also on Wednesday, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. Not surprisingly, the Chamber opposed the motion. On Sunday, the Court issued an Order, refusing to grant the extension. What’s next?
In its motion, the SEC requested that “the Court extend the period of the remand without vacatur pending further action by the Commission to remedy the defects in the rule identified in the Court’s October 31, 2023.” The motion said only that, “[s]ince the remand, the Commission’s staff has worked diligently to ascertain the steps necessary to comply with the Court’s remand order and has determined that doing so will require additional time.” The SEC said that it would provide an update within 60 days on the status of its efforts.
In its response to the motion, the Chamber contended that the Court had “already given the U.S. Securities and Exchange Commission (SEC) ample opportunity to save its deeply flawed rulemaking—more than even required under the Administrative Procedure Act (APA).” According to the Chamber, the “SEC’s bare-bones motion to extend the Court’s remand period (Motion), filed on the eve of Thanksgiving, confirms it has not, and cannot, remedy those defects (nor the others the Court did not reach). Remarkably, the SEC makes no attempt to explain what progress it has made in the near-month since the Court issued its opinion; offers no explanation for what work remains to be done to address the problems identified by the Court; and provides no timetable for when, if ever, the Court, Petitioners, and issuers can expect that work to be completed.” The Chamber argued that the SEC was “not entitled to further departure from the APA’s default rule of vacatur, and its Motion comes nowhere close to explaining why the extraordinary remedy of an indefinite extension of the Court’s already-generous 30-day remand period is warranted. Given the SEC’s admission that it cannot meet the Court’s original deadline, the Court should confirm that the Rule is vacated when that period expires.” Nor was the Chamber satisfied with the SEC stay order, which could be lifted at any time and left issuers in limbo. Under these circumstances, the Chamber contended, “no extension of the Court’s deadline is warranted. This Court instead should make clear that it meant what it said in its opinion and deny the SEC’s Motion, so that if the Commission cannot meet the original deadline, the rule is vacated.”
On Sunday, the Court responded, denying the SEC’s motion to extend the period of the remand pending further action by the SEC to remedy the defects in the rule identified by the Court. Stay tuned.
