As reported by Bloomberglaw.com, during an interview on “Balance of Power” on Bloomberg Television, SEC Chair Gary Gensler said that he does not intend to “rush” the SEC’s agenda “to get ahead of possible political changes in Washington,” that is, in anticipation of the November elections. According to Bloomberg, he insisted that he’s “‘not doing this against the clock….It’s about getting it right and allowing staff to work their part.’” As the article reminds us, if Republicans win all three branches in November, they could repeal regulations adopted shortly before the turnover in party control. In addition, a number of the SEC’s rules are being challenged in court and “those court battles could bleed into next year.”
The SEC has adopted about 34 rules during Gensler’s tenure, but, Bloomberg reports, “about 20 remain and many of those are opposed by conservative Republicans,” such as climate disclosure regulation. In remarks Wednesday, Gensler counted six rulemakings that have been challenged in court, but that count does not include proposed rules such as climate disclosure that are highly likely to face challenges in the future, especially if they ultimately require disclosure of Scope 3 GHG emissions, a provision that has come under fire from Republicans and even some Democrats and Independents. See, e.g., these comments from Senator Amy Klobuchar and Senators Jon Tester and Kyrsten Sinema)
As Bloomberg has previously reported, the clock could affect both the defense of any litigation challenging new rules and possible Congressional action to undo them. If, for example, a climate disclosure rule is adopted this year, any litigation that might be commenced shortly thereafter is highly unlikely to be resolved by 2025. If Republicans were to win the presidency in 2024 and take control of the SEC in January 2025, Bloomberg posits, a “Republican-led SEC would have the power to end its defense of the rule,” although environmental organizations could step in to defend the rule.
Another challenge might arise with regard to climate disclosure regulation “if the SEC punts the regulation too far into [this] year. A federal law, the Congressional Review Act, would let a Republican-controlled House and Senate in the next Congress quickly revoke regulations the SEC and other agencies issued in late 2024, if they avoid a presidential veto.” (See this PubCo post.) More specifically, the CRA allows both houses of Congress to nullify a recently adopted rule by passing a joint resolution that is signed by the president. The CRA is applicable to rules (and even some guidance) that were finalized by the executive branch and sent to Congress in the previous 60 “legislative days.” However, there is also a reset mechanism that can complicate the calculation. (See this PubCo post.)
Other possible rulemakings—especially those that have appeared on prior agendas but have yet to make it out of the starting gate—could well be in jeopardy under the CRA, if the GOP were to win the White House and majorities in Congress, that is. Examples might include plans for human capital management disclosure and for disclosure regarding corporate board diversity. On the SEC’s most recent agenda, the target dates for issuance of these proposals are April 2024 and October 2024, respectively. As Bloomberg notes, the SEC process for adopting a new rule typically takes about 18 to 24 months, on average.
In the televised interview, Gensler was asked “whether he regrets seeking to pursue such an ambitious agenda given the political headwinds.” According to Bloomberg, “Gensler said he did not. ‘Knowing everything we know now, we would probably have laid out a similar agenda.’”
