SEC extends comment period on climate risk, private fund, exchange proposals

The Securities and Exchange Commission on Monday extended the public comment period on proposed rules regarding climate disclosures, private funds and market structure, responding to widespread pleas that the agency provide more time to give input.

The SEC will take comments until June 17 on a proposal to mandate climate risk disclosures by public companies. The previous deadline was May 20.

The agency will provide an additional 30 days of comment for two proposals for which the deadline has already passed. One measure would increase regulatory scrutiny of private funds and the other would update how the SEC defines an exchange and alternative trading systems. The extra time will begin when the reopening release is published in the Federal Register.

SEC Chairman Gary Gensler said the three proposals had drawn “significant interest” from investors, issuers, market participants and others.

“The SEC benefits greatly from hearing from the public on proposed regulatory changes. Commenters with diverse views have noted that they would benefit from additional time to review these three proposals, and I'm pleased that the public will have additional time to provide thoughtful feedback,” Gensler said in a statement.

Gensler has been under pressure from Republican lawmakers and industry trade associations to allow more time for feedback on rulemaking. He indicated a preference for a comment period of 30 days and then shifted to allowing 60 days for most proposals.

Monday’s move to allow more breathing room was welcomed by organizations representing financial advisers.

“Without sufficient time for stakeholders to analyze the proposal and collect the data necessary to support meaningful input, investors, advisers and effective capital markets may all be negatively impacted,” Gail Bernstein, general counsel at the Investment Adviser Association, said in reference to the private fund proposal. “We’re hopeful this signals more reasonable comment deadlines.”

The Securities Industry and Financial Markets Association said the extra time for comments would improve the economic analysis of proposals. It also called on the SEC to narrow the focus of its wide-ranging list of proposed rulemakings.

“Providing more time to comment will allow stakeholders time to provide critical information the SEC must consider, including preparing robust cost benefit analysis, impact on market functioning and, importantly, investors,” SIFMA CEO Kenneth Bentsen Jr. said in a statement. “Further, the Commission should consider the cumulative impact of its rulemaking agenda and the need for prioritization, particularly given the need to finalize important, long pending rule proposals such as the Consolidated Audit Trail (CAT) Data Privacy Rule.”

Tapping the brakes on the climate risk, private fund and exchange proposals to gather more input is good for the agency and those who will be affected by the rules, said Tom Gorman, a partner at Dorsey & Whitney.

“This was a fairly controversial package of proposals to put out,” said Gorman, a former SEC enforcement attorney. “This is good rule-writing practice by Gensler. It gives everyone a chance to tell the agency what they think about these ideas.”

But giving potential opponents of the rule more time to say their piece won’t necessarily ease their concerns.

There likely will be legal challenges once the rules are enacted, Gorman said.