Does the SEC Have Legal Authority to Adopt Climate-Change Disclosure Rules?

Abstract

The Securities and Exchange Commission is planning to propose new mandatory disclosure rules on climate change without further statutory authority from Congress. The purpose of this comment is to explain that the SEC does not currently have statutory authority to adopt such disclosure rules. When evaluated against the Supreme Court’s normal and straightforward method of determining an agency’s rulemaking power, the two main securities acts limit the SEC’s power to issue disclosure rules to specific types of information, such as the business of the company selling the securities, the management, capital structure, and financial statements. Climate-change disclosure rules would have a different subject matter and a different objective from the kind of disclosure requirements Congress permitted the SEC to write. The need for the SEC to have explicit statutory power for climate-change disclosure rules is important to the U.S. form of self-government and the accountability of government officials to the voters. The SEC should respect the role of Congress in setting national policy and stay within the bounds of its statutory authority. This paper was written in anticipation of the SEC, as a full commission, voting to request public comment on a climate-change disclosure proposal. It will be adapted as a comment and will be filed with the SEC shortly after that.