An SEC rule governing shareholder access to proxy materials was struck down by a federal appeals court panel.  It was at least the 3rd time in 6 years that an SEC rule was struck down because the Agency hadn't sufficiently assessed its economic effects.

The rule in question had been approved, but the SEC delayed implementation pending court review.  While the rule was favored by unions, pension funds and other institutional investors, it had been opposed by business lobbyists.  As written, the rule would have provided for, the following:

• it would have required issuers to include information about shareholder-nominated candidates for election to a corporate board of directors in proxy materials.
• it would have allowed groups owning at least 3% voting power of a company's stock for at least 3 years to nominate candidates to a corporate board.
• it would have required that shareholder-nominated board candidates be included in proxy materials that would be mailed to shareholders at the issuer's expense. 

Under current rules, groups starting a proxy contest must pay for their own distribution of materials.

The SEC has tried in the past to guarantee shareholders access to company proxy statements, but all attempts have stalled in challenges over whether or not the agency had the authority to do so.  It seemed that the Dodd-Frank Act had given the SEC explicit authority to do so.  That authority, however, was short-lived.

The 3-judge panel of the D.C. Circuit Appeals Court ruled that the SEC failed to fulfill requirements laid out in the Administrative Procedure Act - specifically, any new regulation must be accompanied by cost-benefit analyses.  The court didn't mince words, saying the SEC "acted arbitrarily and capriciously" by not assessing the regulation's impact on "efficiency, competition and capital formation."    [NYTimes, 7/23/11]   See also today's Behind The News story, "SEC Embarrassed by 'Judicial Smackdown."