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Virginia Law and Business Review,





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On April 28, 2022, the Securities and Exchange Commission (SEC) announced that it had charged Brazilian mining company Vale with misleading investors about safety issues prior to a deadly dam collapse that killed hundreds and led to significant environmental harm in the Brazilian state of Minas Gerais. The action against Vale was largely seen as the agency's first significant move after it had created an Environmental, Social, and Governance (ESG) Task Force within the Division of Enforcement, the purpose of which is to identify and investigate ESG-related violations.

This action against Vale also emerged at a time when scholars, practitioners, and regulators, are engaged in a larger debate regarding what role the SEC should have in regulating corporate actions and statements that are connected to human rights harms. Here, we move the debate forward by offering a first-of-its kind analysis regarding whether the SEC's Division of Enforcement—as the county's leading financial markets enforcer—should broaden its focus to include issues that would traditionally all within a business and human rights, i.e., non-financial, framework.

Our analysis comes at a particularly prescient time in the agency's history: on March 4, 2021, the SEC announced the creation of an 'Enforcement Task Force" that would focus on ESG. In this article, we argue that there are three developments, in particular, that have led to the Division of Enforcement's prioritization of this issue. First, institutional investors have become increasingly engaged with corporations (e.g., through shareholder proposals and shareholder litigation) regarding issues that implicate broader societal impacts. A second development relates to the impact that external rule setters have had on ESG reporting by corporations, particularly in the global context. Finally, the Division of Enforcement's actions comes at a time when the agency, more generally, has embarked on a rulemaking process surrounding ESG disclosure requirements for both corporations and institutional investors.

We believe that these three developments, in turn, have created mutually reinforcing notions regarding what the "reasonable" investor considers material (a key element in securities fraud litigation). As a result, the landscape regarding what types of cases are brought under securities fraud may broaden significantly soon. Is this, however, a welcome development? We conclude that, while not ideal, the SEC's potential to expand case law in this area may prove to be a key tool that business and human rights advocates use to hold corporations accountable for its abuses.

Recommended Citation

Jena Martin & Rachel Chambers, The Securities and Exchange Commission as Human Rights Enforcer?, 18 Va. L. & Bus. Rev. 93 (2023).



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