Yesterday, in Business Roundtable v. SEC, the U.S. Court of Appeals for the D.C. Circuit struck down the Security and Exchange Commission Rule 14a-11, the “proxy access” rule on the grounds that the Commission acted arbitrarily and capriciously because it failed “adequately to assess the economic effects of a new rule.” Wrote Judge Ginsburg for the court:
the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters.
Under both the Exchange Act and Investment Company Act of 1940, Judge Ginsburg noted, the SEC is required to consider a rule’s ” effect upon efficiency, competition, and capital formation,” and this it failed to do. The rule had been adopted by a split 3-2 commission vote.