Daniel Gallagher: October 25, 2016

Changes to SEC Rule Could Take a Big Bite Out of Your Wallet



Daniel Gallagher

Former SEC Commissioner

The U.S. Securities and Exchange Commission (SEC) is considering changes to its long-standing corporate disclosure framework.

The proposed change would mandate that companies disclose financially non-material environmental and social policy information, including how they might be impacted by a changing climate.Β  This means that acompany would be required, by law, to disclose to investors potential social and environmental matters that may or may not be related to their business. In essence, they could be forced to disclose almost entirely speculative information about how climate change might impact their business decades from now, and be legally liable for the accuracy in predicting what is unknowable. Β For example, the SEC could require companies to estimate how much sea levels will rise over the next 20 years and what that means for their organizations – even if there is no reliable way of estimating the probability, let alone actual amount, that sea levels could rise.

What this means for consumers is they lose money on not one, but three different levels.Β  First, by limiting access to the capital markets, it will make energy production more expensive – raising not just utility rates, but costs in general across the economy – costs that will be paid by consumers.Β  Second, by making it more difficult to invest in these companies, lowering the value of consumers existing retirement investments.Β  Third, public pension funds that are pushing this issue are already dramatically underfunded and will eventually need to be bailed out by taxpayers – and in many cases a tax increase to cover the costs.


Daniel M. Gallagher, β€œDan,” served as a Commissioner of the U.S. Securities and Exchange Commission (SEC) from November 2011 to October 2015. As commissioner he was on the front lines of the SEC’s response to the financial crisis, the liquidation of Lehman Brothers, and the downfall of Bernie Madoff. He is an outspoken critic of Dodd-Frank. During his tenure at the SEC, Dan focused on initiatives aimed at strengthening capital markets and encouraging small business capital formation. He was an ardent supporter of the JOBS Act, as well as an advocate for conducting a comprehensive review of equity market structure issues.

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