The SEC Takes on Climate-Risk Disclosure

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The SEC has launched a monumental rule-making effort to enact mandatory climate-risk disclosure; the goal is “consistency, comparability and reliability,” according to Chairman Gary Gensler. Let’s hope it succeeds and the same principles are applied to disclosing the roles and purposes of broker-dealers and investment advisors.

The chairman’s views on enforcement and disclosure principles suggest what rulemaking should look like.

While teaching law at Washington University in 2003, former SEC Commissioner Troy Parades wrote, “the most hotly contested debate in the history of securities regulation” is about mandatory disclosure.

It’s about to get hot again.

The chairman has set out his thinking on enforcement, the letter and spirit of what rules mean, and the high standard disclosure should meet. He spoke in May to some 1,700 FINRA market participants.

He said he is “animated by working families and what the SEC means to them,” and, as an example, that, “best interest means best interest.”

Why? “Going right up to the edge of a rule or searching for some ambiguity in the text or a footnote may not be consistent with the law and its purpose,” according to Gensler. He called the 33 Act the, “truth in Securities Law. Telling the truth matters.”