Earlier this year, in reporting on the SEC’s adoption of final rules mandating extensive climate disclosures, we noted that the rules were almost certainly going to generate litigation. In fact, by the time our earlier alert was published, a lawsuit or three had already been commenced, and we have seen reports that up to 30 parties have since joined various lawsuits challenging the rules. Among other things, one or more of the lawsuits have resulted in stays of the rules, some of those stays have been lifted but may be reinstated, and so on.
Perhaps in response to the uncertainty (dare we call it chaos?) that has developed around the rules, the SEC announced on April 4, 2024 that it will voluntarily stay implementation of the rules pending the outcomes of the various legal challenges.
While voluntary SEC stays are rare, they are not unheard of. Aside from the various lawsuits and the possibility that the courts would impose a stay in any case, the Commission may have been motivated by the fact that 2024 is a major election year and a desire avoid (further) antagonizing the business community. However, lest the SEC be viewed as political, the stay order asserts that it is committed to defending the rules:
“[T]he Commission is not departing from its view that the Final Rules are consistent with applicable law and within the Commission’s long-standing authority to require the disclosure of information important to investors in making investment and voting decisions. Thus, the Commission will continue vigorously defending the Final Rules’ validity in court and looks forward to expeditious resolution of the litigation.”
That being said, while the duration of the stay is uncertain, it could remain in place for quite a while. Challenges of SEC rules have taken up to four years in some cases, and it’s anyone’s guess whether the composition or orientation of the SEC when the stay is lifted will be the same as or totally different from that of the current Commission.
As the saying goes, “watch this space…”.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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