On October 31, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the SEC’s 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 was “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, “short of vacating the rule,” it would put the rule on life support, allowing 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 November 22, 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.) On the same date, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. In its motion, the SEC 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 in the motion that it would provide an update within 60 days on the status of its efforts. Not surprisingly, the Chamber opposed the motion. On November 26, the Court issued an Order, refusing to grant the extension, and on December 1, the SEC’s Office of General Counsel submitted a letter to the Court advising that the SEC would not be able to correct the defects by the Court-imposed deadline. (See this PubCo post, this PubCo post, this PubCo post and this PubCo post.) Today, the Chamber filed a motion to vacate the SEC’s final share repurchase rule. As recounted by the Chamber, the SEC advised the Chamber that it took no position on the Chamber’s motion. Will the Court now pull the plug on the repurchase rule?
In its 13-page motion, the Chamber observes that the “Court withheld vacatur for 30 days to give the [SEC] a chance to correct the multiple defects the Court identified in the Rule. That period expired a week ago, and this Court denied the SEC’s motion for an extension of time. The SEC has conceded it has not corrected the Rule and has given no indication that any correction is forthcoming.” What’s more, the Chamber states, “when Petitioners notified the SEC that they would be filing this motion to vacate the Rule and sought its position, counsel responded that the Commission takes no position on it. Thus, the only remaining step for this Court is to vacate the Rule.” Although the Court’s October 31 opinion did not explicitly state the “consequences of failing to correct the rule within that period,” the Chamber argues, “the Court’s directive only makes sense if it intended vacatur to take effect at that time.” “Even if the next step were an open question,” the Chamber contends, vacatur would still be required: the rule’s “defects are fundamental. The SEC will experience no prejudice from vacatur, and absent vacatur, issuers will suffer unjustified uncertainty and irreparable harm. There is no compelling basis to leave Petitioners and issuers wondering whether or when the SEC will force them to comply with a rule this Court has held to be unlawful multiple times over. Instead, this Court should put this case to rest and issue a final judgment vacating the Rule.” According to the Chamber, because the Court’s opinion mandated the Rule’s vacatur, the Court “should issue a final judgment declaring as much to provide certainty to both the regulator and the regulated as to the state of the law.” In light of the position of the SEC articulated to the Chamber, will the Court now put an end to this matter and vacate the rule?
