The SEC’s Full Employment for Lawyers Gambit

Clarice Feldman09 Mar, 2024 3 Min Read
Thanks, SEC!

Two years ago the SEC (Security and Exchange Commission) first indicated it was proposing "climate change" disclosure regulations and invited comments. The proposal was widely challenged and received 16,000 comments. Although the SEC has no authority in this area, the final regulations were released on March 6. They’ve been changed since they were first proposed two years ago but certainly will remain expensive and burdensome to comply with , will increase costs to consumers of everything (including food, the cost of which is already soaring), and will doubtless be the subject of numerous lawsuits that the SEC will lose.

They are, however, a testament to the Democrats’ single-minded pursuit of increased power and embracement of the fantasy that man’s dominion over the earth includes his power to control the climate if only the right hands are at the levers of power.

At the SEC’s first signaled intention that the disclosure statements, which all publicly listed U.S. companies must file, would have to include its impacts on climate, I took issue with the idea of "climate change" rules in SEC disclosure statements noting, among other things these regulations “would spawn a new industry of navel gazers” and that since the impact statements would not be attested to by certified accountants , the regulations would create a new market for feather merchants and law firms because the disclosures would cover everything from “costs caused by wildfires to the loss of a sales contract because of climate regulations.”

Hell-bent on wrecking everything.

In sum, these disclosures would be impossible to quantify, expensive and time consuming to prepare, and will open the filers (every public listed U.S. company) to numerous lawsuits by hungry litigants and their counsel.

In particular, I took issue with Scope 3 of the proposed rule that filers had to report emissions by their suppliers and consumers—everything from “business travel, employee commutes, waste, purchased goods and services, goods produced , end-of-life disposal of those goods transportation, distribution and more.” In sum, everything. It would have added considerable costs to produce largely theoretical information respecting a threat—"climate change"— that is pure poppycock. Thankfully, this rule has been eliminated.

Still, the burden on American companies is likely to be huge, as is the likelihood of significant and successful legal challenges to Chairman Gary Gensler’s pipedream. The SEC estimated the cost of compliance will be $10.2 billion--$864,864 per firm across 7,400 reporting companies. Stone Washington contends the cost will be much higher.

The SEC’s estimated multi-billion-dollar cost is too conservative. It fails to factor in many indirect and long-term costs incurred to implement the rule, such as deterring private firms from going public, an estimated tens of billions in GDP loss, and reduced innovation. The rule will drastically increase the annual workload burden for public companies by 39 million hours. Even the SEC will be forced to bolster its own staff just to solicit, analyze, and police the new disclosures.

Even more significant than cost and burdensomeness of compliance ,the rule seems to require companies disclose matters outside the scope of what the Supreme Court ruled relevant in such statements, as it is beyond what a “reasonable shareholder would deem to be materially relevant” (TSC Industries v, Northway). I doubt any “reasonable investor” cares how much money a company is spending on transitioning to a low-carbon economy, or would believe the highly theoretical and ephemeral projections in such disclosures, and would be focusing instead more on debt, earnings, pending and anticipated litigation, and other such items normally considered significant enough to require disclosure.

The most significant legal challenge the rule will face is that it’s flatly unconstitutional under West Virginia v. EPA decided just two years ago, a case Gensler had conceded was “meaningful” though he appears to be ploughing ahead anyway.

In its June 2022 decision in West Virginia v. Environmental Protection Agency, the Supreme Court made clear that federal agencies may not assert “highly consequential power beyond what Congress could reasonably be understood to have granted.” The EPA couldn’t find a provision in the Clean Air Act in which Congress gave the agency sweeping authority to restructure the country’s mix of electricity generation with its Clean Power Plan. Under the so-called major-questions doctrine, an agency action of political and economic significance—such as regulating carbon emissions—requires clear congressional authorization. The EPA didn’t have it, so the Clean Power Plan had to go.

With its recently proposed climate change policies, the Securities and Exchange Commission is similarly trying to exercise authority it doesn’t have.

Let the litigation begin!

Clarice Feldman is a retired attorney living in Washington, D.C. During her legal career she represented the late labor leader Joseph ("Jock") Yablonski and the reform mine workers against Tony Boyle. She served as an attorney with the Department of Justice Office of Special Investigations, in which role she prosecuted those who aided the Nazis in World War II. She has written for The Weekly Standard and is a regular contributor to American Thinker.


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