The U.S. Securities and Exchange Commission (SEC) issued a release on Oct. 7, 2022 (Release No. 33-11117, the “Release”) indicating that it was reopening comment periods for 11 proposed rules and a request for comment. The extended comment period will run until Nov. 1, 2022.
A technical issue with the SEC’s online submissions system impacted online comment submissions made between June 2021 and August 2022. BakerHostetler issued a May 11, 2022 client alert about the SEC’s proposed rules on climate-related disclosures, and the Release extends the comment period for that proposal as well (Release No. 33-11042, the “ESG Proposal”), in addition to 10 other proposed rules and a request for comment – all of which are listed below:
No other proposed rules, requests for comment or other material issued by the SEC were noted as being impacted in the Release, though the SEC notes that certain self-regulatory organization (SRO) matters may have been impacted and will be assessed based on comments resubmitted with respect to such SRO matters.
Regarding the ESG Proposal in particular, the proposed rules were anticipated to phase in for large accelerated filers for fiscal year (FY) 2023 reporting and all other registrants for FY 2025 reporting (2024 for accelerated filers and 2025 for smaller reporting companies), with the required content of those disclosures expanding through reporting for FY 2027 (from limited to reasonable assurance), when all contemplated reporting requirements would apply. Potential delays caused by the extended comment period might push back the ESG Proposal’s compliance dates, though companies preparing for new disclosures contemplated in the ESG Proposal should not assume the extension would have that effect.
Further uncertainty regarding the timing and scope of the climate-related disclosure requirements is expected to arise due to legal challenges to the SEC’s authority to implement them. Included in the previously submitted comments were arguments on both sides, including from the Working Group on Securities Disclosure Authority, which believes that the rules in the ESG Proposal are likely to survive such challenges. The group’s signers include multiple former SEC chairs, former SEC general counsels and top securities law professors, and its letter concluded as follows:
As noted above, we hold a wide range of views on the specifics of the SEC’s proposals. But whatever our views on those subjects, we are unanimous in our conclusion that the Commission has statutory authority to mandate climate-related disclosures. We urge the SEC to give little weight to claims that it lacks authority in this area, instead focusing on the difficult policy choices that developing these rules will necessarily require.
However, the SEC must also take into account the Supreme Court’s June 2022 ruling in West Virginia v. Environmental Protection Agency, in which the Court limited the EPA’s ability to regulate greenhouse gas emissions from power plants based on the “major questions doctrine.” BakerHostetler issued an August 12, 2022 client alert about this case. The major question doctrine provides that in certain “extraordinary cases,” administrative agencies must have “clear congressional authorization” to make decisions of vast “economic and political significance.”
The legal challenges that may be raised and how they will be resolved remain to be seen. Since the extension was announced, additional comments have already been posted for the SEC’s consideration in developing the final formulation of the rules.
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