U.S. SUPREME COURT TEARS AWAY AT THE ABILITY OF AGENCIES TO PROTECT THE PUBLIC. 

The Supreme Court ended its 2023-2024 term with three decisions that will undermine, for years to come, the ability of the government’s regulatory agencies to protect the public from a wide range of threats to their health, safety, welfare, and financial well-being. Wall Street and Corporate America are undoubtedly celebrating these decisions because they represent victories in their misguided war on regulation—their attack on what they call the “administrative state.”

• In Loper Bright Enterprises v. Raimondo, Secretary of Commerce, No. 22-451, 144 S. Ct. 2244 (June 28, 2024), the Court prohibited all federal judges from deferring to an agency’s interpretation of an ambiguous statute that Congress entrusted the agency to implement and enforce, giving courts much more power to strike down agency rules;
• In Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008, 144 S. Ct. 2440 (July 1, 2024), the Court eliminated the general time limit within which agency rules can be challenged in court under the APA, in effect allowing rules that have been final and in effect for decades to be challenged at any time; and
• In SEC v. Jarkesy, No. 22-859, 144 S. Ct. 2117 (June 27, 2024), the Court struck down the SEC’s ability to seek civil penalties from lawbreakers through in-house administrative enforcement proceedings, requiring all claims for such monetary relief to be brought in federal court and before a jury, a much more time-intensive and costly enforcement process.

As more agency rules succumb to judicial review under these holdings, so will the protections they provide to the American public.  For our purposes, that means investors and financial consumers will suffer more fraud, abuse, and discrimination; banks will have more leeway to undertake predatory and systemically risky practices; and ultimately, our financial system and economy will be less stable, fair, transparent, and accountable.  Americans will suffer in real financial terms, and the next financial crisis is likely to arrive sooner and be more severe.  To read more about these cases and why they matter so much, see our special report.

LITIGATION OVER THE SEC’S CLIMATE RISK DISCLOSURE RULE IS IN FULL SWING, WITH BETTER MARKETS FILING AN AMICUS BRIEF – State of Iowa v. SEC, No. 24-1522 (8th Cir.).

In March this year, the SEC issued a rule that requires companies to disclose the climate-related risks they face and how they are addressing those risks. Investors of all types have long been demanding such a rule because climate-change risks are affecting the financial prospects of virtually every company in every industry.  The rule gives investors the tools they need to decide where to invest money and how to vote their shareholder proxies.  Unlike the many voluntary disclosure guidelines that have sprung up around the world, the rule will ensure that investors have more complete, reliable, standardized, and comparable information in familiar and accessible reports.

The rule was promptly challenged and numerous cases were consolidated in the U.S. Court of Appeals for the Eighth Circuit.  On August 15, 2024, Better Markets, joined by the Consumer Federation of America, filed an amicus or “friend of the court” brief defending the rule, available here.  We argued that the SEC has clear authority to require such disclosures and has been exercising that authority since its founding 90 years ago.  We also refute the notion that the rule turns the SEC into another EPA, since in fact, the rule doesn’t say anything about how to address climate change or even how companies should respond to it.  Nor is this like the so-called “major question” cases that require extra-clear congressional authority.  This is business as usual for the SEC, especially since the SEC began addressing the need for climate risk disclosures over 50 years ago.  And the economic and political significance of the rule is modest by comparison to genuine major question cases.  Finally, we dispel the notion that the SEC had to conduct a quantitative cost-benefit analysis for its rule.  That’s simply not what the securities laws or the courts require.

Once briefing is over, we’ll look for oral argument and then a decision on the merits.  The rule is a necessary and appropriate reform that protects investors and the public interest and the court should uphold it.

OTHER CASES WE’RE WATCHING FOR DECISIONS:

• Alliance for Fair Board Recruitment v. SEC, 60626 (5^th Cir.) – Will the court require companies to disclose basic information about the diversity of their boards?
• KalshiEx, LLC v. CFTC, 1:23cv3257 (D.D.C.) – Will the court allow gambling on federal elections?
• In re Overstock, 21-4126 (10th Cir.) – Will the court prevent harmed investors from recovering for a brazen market manipulation just because the perpetrator of the scheme made no secret of his actions?