U.S. Reps. Bill Huizenga (R-MI) and Andy Barr (R-KY) on Dec. 2 introduced legislation that would limit the Securities and Exchange Commission’s (SEC) ability to establish more disclosure requirements on public companies, including for climate-related risks.
The Mandatory Materiality Requirement Act of 2022, H.R. 9408, which Rep. Huizenga sponsored and Rep. Barr cosponsored, also would apply to additional disclosure requirements laid out in the SEC’s proposed public company climate disclosure rule. The bill is identical to S. 5005, introduced on Sept. 29 by U.S. Sen. Mike Rounds (R-SD).
“Such an expansion would not only damage our economy, it would negatively impact small businesses and make it more difficult for investors to retire with financial security,” Rep. Huizenga said.
“I am proud to be an original cosponsor of the Mandatory Materiality Requirement Act in the House to ensure that the SEC is sticking to its statutory mandate and commend Representative Huizenga and Senator Rounds for helping to lead the charge against woke climate policy in our financial markets and institutions,” Rep. Barr said.
The bill addresses an SEC March proposal that would require public companies to disclose myriad climate-related information in their registration statements and periodic reports, including the oversight and governance of climate-related risks by the company’s board and management, and how any identified climate-related risks have affected or are likely to affect the company’s strategy, business model and outlook, among other requirements.
The SEC’s proposal has broad support from institutional investors and asset managers. But Rep. Huizenga calls it part of the SEC’s “heavy-handed regulatory approach.”
“Nowhere is this more evident than the SEC’s clear desire to massively expand disclosure requirements,” the congressman said. “The SEC has a long, established history of using the materiality standard when proposing new disclosure requirements and it should continue to do so.”
Specifically, the measure would amend both the Securities Act of 1933 and the Securities Exchange Act of 1934 by inserting statutory language into both acts to require that when imposing a disclosure obligation, the SEC must determine that “there is a substantial likelihood that a reasonable investor of the issuer would consider the information disclosed to the commission under the requirement to be important with respect to an investment decision regarding the issuer,” according to the bill’s text.
“The materiality standard is the investor-driven backbone of our capital markets,” said Rep. Barr. “Immaterial reporting requirements like those outlined in the [SEC’s] climate-related disclosure proposed rule place an undue burden on companies and small business, discriminatorily choke off energy companies’ access to capital, and threaten American energy security.”
The bill, added Rep. Huizenga, would codify this standard into law and prohibit the SEC from expanding beyond securities law and the authority granted to it by Congress.