The Eighth Circuit Court of Appeals has put the Securities and Exchange Commission, or SEC, in a tough spot.
In a recent order, the court told the SEC that it must either defend its climate disclosure rule in court or officially start the process to get rid of it. The court rejected the SEC’s attempt to simply stop defending the rule and leave it up to the courts to decide its fate.
This move creates a major delay. The court has essentially paused the legal fight until the SEC makes a formal decision.
Why is this happening?
Earlier this year, the current SEC leadership decided to stop defending the climate rule that was put in place by the previous administration.
That rule required companies to report on climate risks and greenhouse gas emissions. The SEC leadership at the time called the rule “costly and unnecessarily intrusive.” In a letter to the court, the SEC said it was withdrawing its defense.
The Court’s stance:
The Eighth Circuit’s order sends a clear message: agencies cannot just walk away from their own regulations.
The court’s “abeyance” means the legal challenge is on hold. The court stated that it’s the SEC’s “responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation.”
This decision prevents the SEC from avoiding the long and complicated process of formally rescinding the rule through public comments and other steps.
What’s next?
The ruling means a final decision on the rule is likely years away. The formal process to create or remove a rule can take a long time. For example, the original climate rule took over three years to become official.
According to experts, this court decision makes it much harder for the SEC to quickly get rid of the climate disclosure regulation. It also reinforces the idea that agencies must follow proper procedures when they want to change or abandon
a rule.
