On April 4, 2024, the U.S. Securities and Exchange Commission (SEC) issued an order staying the Final Rule for the Enhancement and Standardization of Climate-Related Disclosures for Investors (“Final Rule”) that it released not more than a month before, to require registrants to provide certain climate-related disclosures in their registration statements and annual reports.[1] The SEC’s administrative stay will remain in place until the completion of litigation filed in the federal courts that challenges the agency’s authority to adopt the Final Rule.
We previously provided an update on the Final Rule, which was finalized on March 6, 2024, and we noted the staggered compliance dates, which began as early as 2025 and as late as 2033, depending on the registrant’s filing status and the type of disclosure. The stay is likely to affect these dates, given the likelihood that it will still be in place by the time — in 2025 — that the first registrants would be required to comply with the Final Rule.
Since publication of the Final Rule, multiple parties have challenged the agency’s authority to issue the rule in multiple courts.[2] The first petition was filed in the Fifth Circuit on the same day as the Final Rule’s publication.[3] That court stayed the Final Rule’s implementation on March 15, 2024, but it dissolved its administrative stay seven days later,[4] by which time the Judicial Panel on Multidistrict Litigation had consolidated the petitions for review in the Eighth Circuit.[5] Petitioners renewed their requests for a stay in the consolidated case, at which point the SEC issued the voluntary stay.
Petitioners contend that the Final Rule violates the First Amendment, is arbitrary and capricious, and runs afoul of the “major questions” doctrine, as recently articulated in West Virginia v. EPA, 597 U.S. 697 (2022).
The SEC contends that the stay is not an indication that it believes the Final Rule is inconsistent with applicable law or the SEC’s authority to promulgate such rules. The order issuing the stay notes that the agency plans to vigorously defend the Final Rule.
[1] U.S. Securities and Exchange Commission, Release Nos. 33-1128034-99908, File No. S7-10-22, Order Issuing Stay (April 4, 2024), available at https://www.sec.gov/files/rules/other/2024/33-11280.pdf.
[2] Nat. Res. Def. Council, Inc. v. SEC, No. 24-707 (2d Cir. filed Mar. 12, 2024); Liberty Energy Inc. v. SEC, No. 24-60109 (5th Cir. filed Mar. 6, 2024); Louisiana v. SEC, No. 24-60109 (5th Cir. filed Mar. 7, 2024); Tex. All. of Energy Producers v. SEC, No. 24-60109 (5th Cir. filed Mar. 11, 2024); Chamber of Commerce of U.S. of Am. v. SEC, No. 24-60109 (5th Cir. filed Mar. 14, 2024); Ohio Bureau of Workers’ Comp. v. SEC, No. 24-3220 (6th Cir. filed Mar. 13, 2024); Iowa v. SEC, No. 24-1522 (8th Cir. filed Mar. 12, 2024); West Virginia v. SEC, No. 24-10679 (11th Cir. filed Mar. 6, 2024); Sierra Club v. SEC, No. 24-1067 (D.C. Cir. filed Mar. 13, 2024).
[3] Liberty Energy Inc., et al. v. SEC No. 24-601109 (5th Cir. filed Mar. 6, 2024).
[4] ECF No. 87, Liberty Energy Inc. v. SEC, No. 24-60109 (5th Cir. Mar. 22, 2024).
[5] State of Iowa et al. v. SEC, No. 24-1522 (8th Cir. Mar. 21, 2024)
