The U.S. Court of Appeals for the D.C. Circuit handed down its decision in the Business Roundtable and Chamber of Commerce’s challenge to proxy access today.
The Court vacated Exchange Act Rule 14a-11, finding that the Commission acted arbitrarily and capriciously when promulgating the rule, because: (1) “it neglected its statutory responsibility to determine the [Rule’s] likely economic consequences … and to connect those consequences to efficiency, competition, and capital formation … [and (2) of its] decision to apply Rule 14a-11 to investment companies … .” The Court did not address the petitioner’s First Amendment challenge.
Judge Ginsburg penned a scathing opinion for the Court, and as Broc Romanek and Brian Breheny note, other than appealing the decision en banc, the Commission generally has three options going forward: revise and reapprove Rule 14a-11 now, allow Rule 14a-8 to go effective now and revise and reapprove the Rule 14a-11 later, or do nothing.
Update: 4:30 PM
Each of the parties has now made their obligatory public statement:
The Business Roundtable and U.S. Chamber of Commerce issuing a joint statement applauding the decision as a “big win for America’s job creators and investors …” and the SEC a brief statement expressing disappointment, noting that it is exploring its options and reminding us that Rule 14a-8 remains unaffected by the decision.