As we described last August, the U.S. SEC adopted a new proxy rule last year to, under certain circumstances, require companies to include shareholder nominees for director in the company's proxy materials. In a decision released last week, however, the United States Court of Appeals for the District of Columbia vacated the rule.

Specifically, the petitioners argued that the SEC had enacted the rule

in violation of the Administrative Procedure Act ... because, among other reasons, the Commission failed adequately to consider the rule’s effect upon efficiency, competition, and capital formation, as required by Section 3(f) of the Exchange Act and Section 2(c) of the Investment Company Act of 1940.

Ultimately, the Court of Appeals agreed, finding that the SEC "acted arbitrarily and capriciously" in failing to adequately "assess the economic effects of a new rule."