TheCorporateCounsel.net

In a recent speech, SEC Commissioner Mark Uyeda criticized the process by which the SEC adopted its pay versus performance disclosure rule, and in particular called out some of the goofy proxy disclosure resulting from the SEC’s decision to change the definition of “compensation actually paid” and the treatment of equity awards in the final rule without seeking additional public comment. He says there’s a lesson there for the SEC that it should take into account before moving forward with a final climate change disclosure rule:

Hopefully, the Commission will consider learning from the lesson of the pay versus performance rulemaking as it moves forward with other rulemakings, including climate-related disclosure. This proposal has received over 16,000 comments. The volume of comments is not surprising given the proposal’s expansive nature and the hundreds of requests for feedback contained in it. Most commenters did not focus on, or address, every single issue or alternative raised in the proposal.

Before the Commission adopts any final rule that significantly deviates from the proposal, it should seriously consider re-proposing the rule with revised rule text and an updated economic analysis. Doing so would provide the public with an opportunity to focus on aspects of the proposal that they did not initially consider, and perhaps more importantly, submit feedback on any revised requirements.

Commissioner Uyeda argues that a re-proposal “may ultimately help the Commission craft a better rule for all market participants” and says that the SEC should do everything possible to avoid promulgating a “costly and ineffective” rule. Okay, but what if the SEC just moves forward with a final rule? Well, that’s where Commissioner Uyeda drops his mic – he says that adopting a rule without reproposing it “might be indicative of a flawed process that raises the question of whether the rule is arbitrary and capricious under the Administrative Procedure Act.”

– John Jenkins