Moving at a Glacial Pace: What Can State Attorneys General Do about SEC Inattention to Nondisclosure of Financially Material Risks arising from Climate Change?
In recent years, two certainties have created a mass of uncertainty for public companies. First, companies must disclose material financial information in their annual statements, known as 10-Ks, to the SEC. Second, climate change poses financial risks to the way businesses operate. Together, these principles have generated significant uncertainty within the regulatory and law enforcement arenas. Specifically, companies and law enforcement officials are uncertain about what risks stemming from climate change must be disclosed in 10-Ks, and how that information should be presented. The actor primarily responsible for clarifying disclosure requirements is the Securities and Exchange Commission (SEC). This Note will argue that the SEC’s most recent attempt to address this uncertainty -- a 2010 interpretive release -- is inadequate, and that the SEC should issue additional guidance. As the SEC has not been active on this issue in the past four years despite promising further action on climate change disclosure, the Note will then argue that state attorneys general, particularly the New York Attorney General, should attempt to address this inaction through use of state securities laws and other advocacy tools. Before addressing the proposed solution, Part II of this Note will detail the federal securities disclosure regime currently in place, and discuss the SEC’s approval of its 2010 interpretive release. Part II will also outline the events leading to the interpretive release, specifically the actions taken by then-Attorney General Andrew Cuomo (D-New York). Part III will then argue that further guidance from the SEC is necessary, and that current New York Attorney General Eric Schneiderman is best positioned to force SEC action and otherwise provide companies and law enforcement with a framework for disclosure requirements. Part III will also discuss ways in which other state attorneys general could contribute to New York’s efforts.
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