Today, the SEC issued an order to stay the recently promulgated climate disclosure rule until the courts have the opportunity to judicially review the climate disclosure rule. Specifically, the SEC stated that it "has determined to exercise its discretion to stay the Final Rules pending the completion of judicial review of the consolidated Eighth Circuit petitions."
The SEC offered a number of reasons for this voluntary stay, including "the procedural complexities accompanying the consolidation and litigation of the large number of petitions for review of the Final Rules," and that a stay would "facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits." The SEC also stated that a stay "avoids potential regulatory uncertainty," and further noted that "[t]he Commission has previously stayed its rules pending judicial review in similar circumstances."
Notably, however, the SEC made clear that--despite issuing the stay--it remained committed to its mandatory climate disclosure rule, stating that "the Commission will continue vigorously defending the Final Rules' validity in court." In particular, the SEC reiterated 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."
Nonetheless, this voluntary stay is significant, as it ensures that the SEC's mandatory climate disclosure rule will not come into effect--and so not subject companies to the accompanying regulatory requirements--until the courts have the opportunity to assess its validity. In other words, the SEC climate disclosure rule will remain ineffective until (most likely) the Supreme Court rules on whether it passes muster.
Pursuant to Exchange Act Section 25(c)(2) and Section 705 of the Administrative Procedure Act, the Commission has discretion to stay its rules pending judicial review if it finds that "justice so requires." The Commission has determined to exercise its discretion to stay the Final Rules pending the completion of judicial review of the consolidated Eighth Circuit petitions.
In issuing a stay, the 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. [T]he Commission will continue vigorously defending the Final Rules' validity in court and looks forward to expeditious resolution of the litigation. But the Commission finds that, under the particular circumstances presented, a stay of the Final Rules meets the statutory standard.
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