The Ascertainable Standards that Define the Boundaries of the SEC's Rulemaking Authority
The University of Chicago Business Law Review 193 (Vol. 3.1; 2023)
42 Pages Posted: 19 Jul 2023 Last revised: 8 Feb 2024
Date Written: July 24, 2023
On the heels of the U.S. Supreme Court’s decision in West Virginia v. Environmental Protection Agency, the “major questions” doctrine quickly came to be perceived as the most significant impediment to the finalization of the Securities and Exchange Commission’s proposed rule on climate-related disclosures.
This Article presents a new argument against finalization, an argument that does not require the application of the major questions doctrine. This argument finds its authority in the policy objectives and the one constraint that are found in the statutes that underlie the proposed rule. These policy standards not only provide guidance to the SEC in its rulemaking, including the promulgating of rules on climate-related disclosures, but also identifies the boundaries of authority that the SEC must not cross.
The Securities and Exchange Commission has exceeded its delegated authority in promulgating its proposed rule on climate-related disclosures by not adhering to the Congressionally mandated policy standards found in the underlying statutes: “for the protection of investors,” promoting “efficiency, competition, and capital formation,” and “materiality.” These ascertainable standards are identified through the application of the “intelligible principle” test of the nondelegation doctrine and serve as the policy boundaries of the Commission’s delegated authority. These policy boundaries apply to all Commission rulemaking promulgated under these Acts, not just the proposed climate-related disclosures. Moreover, it would not be surprising to find that if an ascertainable standards review of all Commission rules and interpretations were to occur, many of them would be found to violate the boundaries of authority created by the identified standards.
Keywords: nondelegation doctrine, SEC, rulemaking, ascertainable standards, climate-related disclosures, Securities Act of 1933, Securities Exchange Act of 1934, Constitution, policy objectives, for the protection of investors, in the public interest, intelligible principle test
JEL Classification: G18, G38, H11, K2, K22, K23, K32
Suggested Citation: Suggested Citation