Mission Creep at the SEC

By Andrew N. Vollmer
–Senior affiliated scholar with the Mercatus Center at George Mason University, former professor of law, general faculty, at the University of Virginia School of Law, former deputy general counsel of the Securities and Exchange Commission, and former partner in the securities enforcement group of Wilmer Cutler Pickering Hale and Dorr LLP.

The Securities and Exchange Commission (SEC) regulates the nation’s markets for stocks and bonds and has a long list of responsibilities.  It could stay busy and productive tending to the areas that federal statutes designate for it, yet it expands into new areas and activities without proper congressional authorization.  This is commonly called “mission creep,” a particular and recurring problem at federal agencies, said the Supreme Court.

An obvious example of the unjustified expansion of SEC powers is the proposal to require publicly reporting companies to disclose climate change risks.  Congress gave the SEC power to require companies to disclose information about their securities, businesses, and financial performance. The SEC has already ordered elaborate disclosures on those topics, but Congress did not permit the SEC to duplicate its current disclosure rules with a special and parallel set of rules aimed solely at climate-related risks. 

The proposed climate-change disclosure rules would also creep further into the way companies run their businesses. They would require disclosure of whether and how the board of directors and management discuss and manage climate change risks and how the company integrates those risks into its business strategy.  These forced disclosures would inevitably interfere with the best judgment of companies on how to structure their decision-making and internal processes, which are rarely proper subjects of SEC rulemaking.

The full blog can be found here.