The SEC decided not to dispute a July court ruling that struck down one of the its new Dodd-Frank mandated rules for corporate America.  In that ruling, the U.S. Court of Appeals for the District of Columbia Circuit rejected the SEC’s so-called proxy access rule, which would have made it easier for shareholders to oust company directors and install their own candidates for the board. 

The ruling by a 3-judge panel dealt a stinging blow to the SEC and provided a "roadmap" for opponents to challenge and chip away at other new rules, regulations and amendments proposed by the Commission.  Over the last several weeks since the decision was handed down, industry groups like the U.S. Chamber of Commerce have reportedly been examining legal challenges to the SEC’s new corporate whistle-blower program and a provision surrounding the extraction of oil and natural gas from foreign countries.

The ruling in the proxy case, filed by the Chamber of Commerce and the Business Roundtable, was the latest major defeat for the SEC.  All told, the appeals court has now tossed out 3 SEC regulations in the last 6 years, including the proxy rule.  In each case, the court rebuked the agency for not fully evaluating a rule’s economic effects. 

Surprise Decision.   The Agency’s decision not to challenge the most recent appeals court ruling was somewhat surprising.  The SEC had been weighing an appeal to the U.S. Supreme Court, according to a person briefed on the matter, or a rehearing before the entire appeals court, but it ultimately backed off.  It's not clear whether SEC staff attorneys were intimidated by the prospect of going up against Eugene Scalia, a famed regulatory lawyer who's a partner at Gibson Dunn and the son of Supreme Court Justice Antonin Scalia. 

Perhaps, but SEC Chairman Mary Schapiro had this to say:  "I want to be sure that we carefully consider and learn from the court’s objections as we determine the best path forward.”  In any event, the SEC is not ready to scrap the proxy rule altogether. 

“I firmly believe that providing a meaningful opportunity for shareholders to exercise their right to nominate directors at their companies is in the best interest of investors and our markets.  I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.”  -  Mary Schapiro.   [DealBook, 9/6/11]