This is the Cato Daily Podcast for Wednesday, March 13th,

2004. I'm Caleb Brown.

The Securities and Exchange Commission's new rule compelling companies to make detailed

disclosures about climate risk is

already facing legal challenges but it's worth understanding how investors use

information produced by companies and it is not clear that the required statements are giving

investors information that they want or need to make better decisions.

Cato's Jennifer Shulp comments.

When the SEC makes determinations about what it's going to tell public

companies what they have to include in disclosures, what is the principle guiding their decision about doing that, and why this rule?

What gives the SEC the authority, first and foremost, is the statutes, the Securities Act of 1933

and the Securities Act of 1933 and the Securities Exchange Act of 1934

give the SEC relatively broad discretion to choose what public companies are required to disclose to investors.

But that discretion is cabined initially by topics of disclosure, information about the company and

information about the company's financial condition, both of which are

important to investors.

Secondarily, the SEC is limited by requiring information that is, quote,

material to investors.

And the Supreme Court has defined materiality to an investor

as the type of information that a reasonable investor would view as important in making a decision

about investing or similarly about how to vote their stock.

The SEC, in putting out this of their

...