As reported in this PubCo post, the SEC announced yesterday that it was ending its “defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions”—the climate disclosure rules. In response to that action, Commissioner Caroline Crenshaw issued this Statement Regarding Climate-Related Disclosures Rule Litigation: The Commission has Left the Building. She’s none too pleased with the SEC’s action—to put it mildly.
Interestingly—and perhaps not accidentally—in light of Acting Chair Mark Uyeda’s focus on careful compliance with the APA in past remarks (see, e.g., this PubCo post), one of her main charges here is that, in taking this action, the SEC is circumventing the APA:
“Today, the SEC purports to walk away from the Climate-Related Disclosures Rule. In building the rule, we journeyed up a mountain. The Commission spent at least four years taking input—we issued requests for information, made a proposal, opened and reopened comment periods when stakeholders asked for more time or the ability to provide more input, reviewed thousands of comment letters, carefully balanced the interest of investors, markets and issuers, and dutifully tailored a final rule in-line with our mission and our statutory authority. It was an arduous process that led to a sound and strong result.
By way of politics, the current Commission would like to dismantle that rule. And they would like to do so unlawfully. The Administrative Procedure Act (APA) governs the process by which we make rules. The APA prescribes a careful, considered framework that applies both to the promulgation of new rules and the rescission of existing ones. There are no backdoors or shortcuts. But that is exactly what the Commission attempts today.”
She is also critical of the foggy state in which the SEC leaves the climate disclosure rule: Under the SEC’s letter,
“we are apparently letting the Climate-Related Disclosures Rule stand but are withdrawing from its defense in court. This leaves other parties, including the court, in a strange and perhaps untenable situation. In effect, the majority of the Commission is crossing their fingers and rooting for the demise of this rule, while they eat popcorn on the sidelines. The court should not take the bait.
Rather, the SEC should do its job. It should defend its existing rule in litigation. If the agency chooses not to defend that rule, then it should ask the court to stay the litigation while the agency comes up with a rule that it is prepared to defend (be it by rescission or otherwise, but certainly in accordance with APA mandates). At the very least, if the court continues without the Commission’s participation, it should appoint counsel to do what the agency will not— vigorously advocate in the litigation on behalf of investors, issuers and the markets.
The Commission’s actions are inconsistent with the APA, historical practice, and they embody bad governance. We do not have license to wholesale abandon agency action simply because the now-constituted Commission would not have supported the rule when it passed. The new majority cannot now rewrite history to change the outcome of a properly held Commission vote.”
She concludes by contending that this action reflects an SEC mired in a “period of policy-making through avoidance and acquiescence”:
“To be clear, the arguments in the Commission’s Response Brief remain substantively sound. There has been no change in the relevant statutory authority; no new judicial precedent or doctrine; nor any change in the vigorous demand by the investing public. There is no new administrative record, comment file, or economic analysis. As I have said before, the only change here is politics.
Today’s actions are but one symptom of a much larger problem—the Commission taking shortcuts in order to achieve preferred outcomes—this time by skirting the APA. We are now firmly in a period of policy-making through avoidance and acquiescence, rather than policy-making through open, transparent, and public processes. This approach does not benefit the markets, capital formation, or investors. In this instance, the majority of the Commission is hoping to let someone else do their dirty work.”
