On April 4, 2024, the U.S. Securities and Exchange Commission (SEC) published an Order Issuing Stay of rules promulgated on March 6, 2024 requiring registrants to provide certain climate-related information in future registration statements and annual reports (Final Rule). The stay responds to litigation filed in the Fifth and Eighth Circuit Courts of Appeals seeking judicial review of the Final Rule. The stay, according to the Order, will facilitate orderly judicial resolution of the large number of petitions filed for review of the Final Rule. The stay also avoids potential regulatory uncertainty for registrants if the Final Rule went into effect during the pending judicial review.  Despite the stay, the SEC emphasized that the Final Rule is consistent with applicable law and long-standing SEC authority. A few observations:

  1. The stay is based on statutory authority of the SEC 15 U.S.C. § 78y(c)(2) and the APA 5 USC § 705, not a judicial order. Likely, once exclusive jurisdiction is determined for the challenges to the Final Rule, a judicial stay will follow.
  2. The stay means that the rules don’t go into effect on May 4, 2024 as originally scheduled. Cascading deadlines won’t be enforceable until after the litigation resolves.
  3. If the litigation is resolved quickly, then the reporting deadlines could still apply as published, with first disclosures for larger registrants in 2026 (for FY 2025). Registrants are wise to continue to prepare to fulfill the Final Rule’s legal requirements.
  4. Realistically, this litigation is not likely to resolve quickly. Challengers may slow roll the litigation through the November election. Registrants may also slow down preparations to fulfill the requirements of the Final Rule until after the November election.
  5. Practically, the longer the litigation extends, the more likely the compliance deadlines for registration statements and reporting will be extended.
  6. Meanwhile, the 2010 SEC climate disclosure guideline remains in place.