Will Anyone Challenge the SEC’s Ever-Expanding Authority?

This question of redefining a government agency’s mission arose last week during an event hosted by George Mason University’s Center for the Study of Administrative State. Center Director and event moderator Adam White asked his panelists, in various formulations, whether they were concerned about the ever-expanding ambit of federal agencies like the Securities and Exchange Commission (SEC).

The responses from the finance law experts on the panel were pretty mild and non-committal, but I suspect supporters of constitutionally constrained government and free markets will become increasingly concerned in the near future. Video of the event is available here.

SEC Acting Chair Alison Herren Lee has made it clear in recent public statements that she thinks her agency is ready not just to regulate things like environmental, social, and governance (ESG) disclosures by public companies, but racial justice, public health, and climate changes as well:

This last year has helped to clarify why the perceived barrier between social value and market value is breaking down. COVID has driven focus on worker safety. Protests in the wake of the senseless killings of George Floyd and others have driven focus on racial justice. In both of these narratives we can also see connections to climate risk. With COVID, we saw supply chain disruptions similar to that which climate events can cause. We know climate presents heightened risks for marginalized communities, linking it to racial justice concerns. We saw in real time that the issues dominating our national conversation were the same as those dominating decision making in the boardroom.

Apropos of that statement by Commissioner Lee, I wrote earlier this week for National Review’s Capital Matters section that the Securities and Exchange Commission seems to be poised to expand its powers beyond anything envisioned by previous generations of financial regulators:

According to its acting chair, the SEC should be free to regulate on any topic that is part of the “national conversation.” From public health to civil rights to the environment, it is difficult to imagine an issue of any substance that would not qualify as an agency priority under such a justification. And if the commission has decided that it can regulate anything under the sun (or buried beneath the Earth’s surface), what is to stop every other department, commission, and federal board from realizing an equivalent opportunity to expand its authority? So far, no one has offered an answer.

Around the same time, Lee asked for public comment on one of her top agenda items, corporate climate disclosures. I invite to join anyone interested in the issue to submit their own recommendations, as I will be doing, to the agency over the next couple of months.