Larry Cunningham argues that the SEC's pending climate change rule suffers from the same problems as the now defunct proposal to require disclosure of share buyback rationales and data.
State laws allow corporations to repurchase shares, which are seen by some as beneficial for shareholders but criticized by others for negatively impacting workers and social equality. The SEC's rule on disclosing buyback motives was vacated by the Fifth Circuit Court of Appeals for lack of substantial evidence on its benefits, specifically in reducing investor uncertainty. The court argued that without proving buybacks as problematic for investors, the SEC had no basis for mandating rationale disclosure, questioning the rule's focus on stakeholder interests.
The decision raises questions about the SEC's authority and its ability to enforce similar regulations, such as the controversial climate disclosure proposal, which faces scrutiny for potentially overstepping SEC's mandate and being burdensome and controversial. The climate disclosure rule's viability is uncertain, with critics comparing it to the failed conflict minerals rule, which was struck down for imposing a moral judgment under the guise of factual disclosure.
Both cases highlight the ongoing debate over the scope of the SEC's regulatory powers and the balance between investor interests and broader societal or environmental concerns.
