The Securities and Exchange Commission’s sole Democratic member torched her fellow commissioners for voting to end the legal defense of the SEC’s climate disclosure rules, claiming the vote is an attempt to “unlawfully” skirt established guidelines for rescinding existing rules.
“There are no backdoors or shortcuts,” Commissioner Caroline Crenshaw said in a statement on Thursday. “But that is exactly what the Commission attempts today.”
The SEC adopted the climate disclosure rule in March 2024, creating federal requirements for companies to discuss (and disclose) the risks and opportunities climate change poses to their business (while purportedly helping investors compare companies on how they navigate climate change).
The rule faced several court challenges, leading the SEC to temporarily freeze it last April. The cases were consolidated into a single litigation in the Eighth Circuit. Acting SEC Chair Mark Uyeda recently asked the court to pause further developments in the case. At the same time, the commission weighed its options, leading to the vote to end the agency’s legal defense.
“The goal of today’s commission action and notification to the court is to cease the commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules,” Uyeda said.
Uyeda and Commissioner Hester Peirce are the other two current commissioners and the two Republican selections. The Senate has not yet voted on confirming Paul Atkins, Donald Trump’s pick for SEC Chair, though a confirmation hearing was held Thursday.
According to the commission, SEC staff sent a letter to the court after the vote stating commission attorneys are no longer authorized to advance the arguments made in the brief the regulator previously filed (the briefings in the case were completed before Donald Trump entered the White House and previous SEC Chair Gary Gensler departed).
Crenshaw argued that the commission spent four years crafting the original rule, including opening (and reopening) comment periods and reviewing thousands of comment letters. According to Crenshaw, the unwillingness to defend the rule runs afoul of the Administrative Procedure Act, which governs how agencies can promulgate new rules (and eliminate old ones).
However, in the latest decision, Crenshaw said the court is put in a “strange and perhaps untenable situation” where the rule technically stands but is left without legal defense.
“In effect, the majority of the Ccommission is crossing their fingers and rooting for the demise of this rule, while they eat popcorn from the sidelines,” Crenshaw wrote. “The court should not take the bait.”
Instead, Crenshaw said the SEC should continue to defend the existing rule or at least ask the court to stay the litigation while the agency designs a rule it can defend (following APA guidelines).
“The commission’s actions are inconsistent with the APA, historical practice and they embody bad governance. We do not have license to wholesale abandon agency action simply because the now-constituted commission would not have supported the rule when it passed,” Crenshaw wrote. “The new majority cannot now rewrite history to change the outcome of a properly held commission vote.”
Crenshaw reiterated her earlier critiques that the moves at the commission are “a symptom of a much larger problem” in which it is “taking shortcuts in order to achieve preferred outcomes.”
“We are now firmly in a period of policy-making through avoidance and acquiesence, rather than policy-making through open, transparent and public processes,” she wrote. “In this instance, the majority of the commission is hoping to let someone else do their dirty work.”