Mark Uyeda, acting chair of the Securities and Exchange Commission (SEC), took action on the Enhancement and Standardization of Climate-Related Disclosures for Investors rule adopted by the SEC on March 6, 2024.
Giving his reasons in a statement released Feb. 11, he directed SEC staff to notify the court of the changed circumstances and asked that the court not schedule the case for argument to give the SEC time to deliberate and determine the right next course of action in these cases. The SEC will promptly notify the court of its determination about its positions in the litigation.
In the same statement, Uyeda said the rule is now being challenged in litigation consolidated in the Eighth Circuit and the SEC previously stayed effectiveness of the rule pending completion of that litigation. he characterized the rule as "deeply flawed" that can potentially inflict considerable harm on the capital markets and the country's economy.
Uyeda added that both Commissioner Hester Peirce and he voted against the rule’s adoption Peirce stated that then-existing disclosure rules were enough and that the “rule’s anticipated benefits do not outweigh the costs.” She explained that “only a mandate from Congress should put us in the business of facilitating the disclosure of information not clearly related to financial returns.”
According to Journal of Accountancy, the SEC approved the rule 3–2 in a vote that followed political party lines, which was supported by the three Democratic commissioners while being opposed by the two Republican commissioners. Uyeda cast one of the no votes.
The SEC now comprises the same two Republicans (Uyeda and Peirce) and a Democrat (Caroline Crenshaw) appointed by President Donald Trump in 2020. The rules, according to the Journal of Accountancy, limit the number of commissioners from any one political party to three when the SEC is at its full strength of five. This is an ongoing process under the second Trump term since two Democrats, Chair Gary Gensler and Commissioner Jaime Lizárraga, stepped down from their positions.
Uyeda, for his part, noted that the SEC was “without statutory authority or expertise” to address climate change issues and that “this rule is climate regulation promulgated under the Commission’s seal.”
Uyeda also stated that in the comment period, many submissions asked that the rule not be adopted. The rationale given included that the rule would need a considerable amount of financially immaterial information and that financially material climate-related risks were already subject to disclosure under existing rules. He also noted that the proposed rules overstepped the SEC’s regulatory authority.
Previously, Uyeda said that the SEC’s briefs submitted in the cases consolidated in the Eighth Circuit did not reflect his views. The briefs defend the SEC’s adoption of the rule, and he is still questioning the SEC's statutory authority to adopt the rule, the need for it as well as the evaluation of costs and benefits. He also asks if the agency followed the right procedures under the Administrative Procedure Act to adopt the rule.
"The lack of statutory authority is a weighty factor. Commissioners have a constitutional obligation to determine the bounds of the agency’s statutory authority, and my views on the Commission’s authority here were the result of lengthy study and research informed by many comments on all sides of the issue," Uyeda said in the statement.
He added that these views, the recent SEC composition change as well as the recent Presidential Memorandum about a regulatory freeze are all bearing on the litigation's conduct. "I believe that the Court and the parties should be notified of these changes," Uyeda said.