Everything you need to know about ranked-choice voting in one spot. Click to learn more!

Business Roundtable v. SEC

From Ballotpedia
Jump to: navigation, search
New Administrative State Banner.png
District of Columbia Circuit
Court of Appeals
US-CourtOfAppeals-DCCircuit-Seal.png
Judgeships
Posts: 11
Judges: 10
Vacancies: 1
Judges
Chief: Merrick Garland
Active judges: Julianna Michelle Childs, Bradley Garcia, Karen Henderson, Greg Katsas, Patricia Ann Millett, Florence Pan, Cornelia T. L. Pillard, Neomi Rao, Srikanth Srinivasan, Justin Walker, Robert Leon Wilkins

Senior judges:
James Buckley, Harry Edwards, Douglas Ginsburg, Arthur Randolph, Judith Rogers, David Sentelle, David Tatel


Business Roundtable v. SEC was a 2011 case decided by the United States Court of Appeals for the District of Columbia Circuit that vacated (made void) a rule issued by the Securities and Exchange Commission (SEC). The rule was intended to change the way shareholders nominate and elect board members under various state corporation laws. The court held that the agency did not provide adequate cost-benefit analysis when it studied the potential economic impact of the rule. Without that analysis, the court held that the agency acted in an arbitrary-or-capricious manner and vacated the rule.[1]

HIGHLIGHTS
  • The case: The SEC issued the Proxy Access Rule, which allowed groups of shareholders to nominate and elect board members in a new way. The Business Roundtable and Chamber of Commerce of the United States objected, saying that the agency did not fully consider the economic costs and benefits of the new rule.
  • The issue: Whether the SEC acted in an arbitrary-or-capricious manner when it issued the Proxy Access Rule.
  • The outcome: The DC Circuit vacated the rule and held that the SEC did not provide adequate cost-benefit analysis when it studied the potential economic impact of the rule.


    • Why it matters: After the ruling, the SEC hired more economists in order to provide more rigorous cost-benefit economic analyses during the rulemaking process and to avoid charges of arbitrary-or-capricious decision making. One 2016 study found improvements in the quality of SEC economic and regulatory analyses following Business Roundtable and other cases of judicial oversight of agency rulemaking.[2][3]

    Background

    Administrative State
    Administrative State Icon Gold.png
    Read more about the administrative state on Ballotpedia.

    The case

    The Business Roundtable and the United States Chamber of Commerce petitioned the DC Circuit to review an SEC rule (Proxy Access Rule) that required "public companies to provide shareholders with information about, and their ability to vote for, shareholder-nominated candidates for the board of directors." The business groups claimed that the SEC implemented the Proxy Access Rule in violation of the Administrative Procedure Act (APA) because the agency failed to consider the effect of the rule on efficiency, competition, and capital formulation as required by law.[1]

    Arbitrary-or-capricious test

    The arbitrary-or-capricious test is a legal standard of review used by judges to assess the actions of administrative agencies. It was originally defined in a provision of the 1946 Administrative Procedure Act (APA), which instructs courts reviewing agency actions to invalidate any that they find to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." The test is most frequently employed to assess the factual basis of an agency's rulemaking, especially informal rulemakings.[4][5][6][7]

    Decision

    The United States Court of Appeals for the District of Columbia Circuit vacated the Securities and Exchange Commission rule. The opinion was written by Judge Douglas Ginsburg.[1]

    Opinions

    Opinion of the court

    Writing for the court, Judge Douglas Ginsburg began by describing the Proxy Access Rule as an means to address concerns that "the current process impedes the expression of shareholders' right under state corporation laws to nominate and elect directors." Citing precedent from State Farm, the court held that the SEC action failed the arbitrary-or-capricious test that requires agencies to examine relevant data and articulate a satisfactory explanation for its decisions.[1]

    “ Indeed, the Commission has a unique obligation to consider the effect of a new rule upon 'efficiency, competition, and capital formation,' and its failure to 'apprise itself—and hence the public and the Congress—of the economic consequences of a proposed regulation' makes promulgation of the rule arbitrary and capricious and not in accordance with law. [...]


    Here 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. For these and other reasons, its decision to apply the rule to investment companies was also arbitrary. Because we conclude the Commission failed to justify [the Proxy Access Rule], we need not address the petitioners' additional argument the Commission arbitrarily rejected proposed alternatives that would have allowed shareholders of each company to decide for that company whether to adopt a mechanism for shareholders' nominees to get access to proxy materials.[8][1][9]

    		”

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 FindLaw, "Business Roundtable and Chamber of Commerce of the United States of America v. Securities and Exchange Commission," accessed October 30, 2018
    2. ↑ Yale Journal on Regulation: Notice & Comment, "Improved Economic Analysis in SEC Rulemaking? by Chris Walker," accessed October 31, 2018
    3. ↑ Mercatus Center, "Improvements in SEC Economic Analysis since Business Roundtable," Jerry Ellig, accessed December 4, 2018
    4. ↑ The Regulatory Group, "Regulatory Glossary," accessed August 4, 2017
    5. ↑ Electronic Privacy Information Center, "The Administrative Procedure Act (APA)," accessed August 14, 2017
    6. ↑ Environmental Protection Agency, "Summary of the Administrative Procedure Act," accessed August 14, 2017
    7. ↑ Center for Effective Government, "Arbitrary-or-Capricious Test," accessed August 15, 2017
    8. ↑ Internal citations and quotations have been omitted
    9. ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    v • e
    The Administrative State
    MainThe Administrative State Project Badge.png
    Pillars
    Reporting
    Laws
    Administrative Procedure Act • Antiquities Act • Civil Service Reform Act • Clayton Antitrust Act • Communications Act of 1934 • Congressional Review Act • Electronic Freedom of Information Act • Federal Food, Drug, and Cosmetic Act of 1938 • Federal Housekeeping Statute • Federal Reserve Act • Federal Trade Commission Act of 1914 • Freedom of Information Act • Government in the Sunshine Act • Independent Offices Appropriations Act of 1952 • Information Quality Act • Interstate Commerce Act • National Labor Relations Act • Paperwork Reduction Act • Pendleton Act • Privacy Act of 1974 • Regulatory Flexibility Act • REINS Act • REINS Act (Wisconsin) • Securities Act of 1933 • Securities Exchange Act of 1934 • Sherman Antitrust Act • Small Business Regulatory Enforcement Fairness Act • Truth in Regulating Act • Unfunded Mandates Reform Act
    Cases
    Abbott Laboratories v. Gardner • A.L.A. Schechter Poultry Corp. v. United States • Association of Data Processing Service Organizations v. Camp • Auer v. Robbins • Chevron v. Natural Resources Defense Council • Citizens to Preserve Overton Park v. Volpe • Federal Trade Commission (FTC) v. Standard Oil Company of California • Field v. Clark • Food and Drug Administration v. Brown and Williamson Tobacco Corporation • Humphrey's Executor v. United States • Immigration and Naturalization Service (INS) v. Chadha • J.W. Hampton Jr. & Company v. United States • Lucia v. SEC • Marshall v. Barlow's • Massachusetts v. Environmental Protection Agency • Mistretta v. United States • National Federation of Independent Business (NFIB) v. Sebelius • National Labor Relations Board v. Noel Canning Company • National Labor Relations Board v. Sears, Roebuck & Co. • Panama Refining Co. v. Ryan • Securities and Exchange Commission v. Chenery Corporation • Skidmore v. Swift & Co. • United States v. Lopez • United States v. Western Pacific Railroad Co. • Universal Camera Corporation v. National Labor Relations Board • Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council • Wayman v. Southard • Weyerhaeuser Company v. United States Fish and Wildlife Service • Whitman v. American Trucking Associations • Wickard v. Filburn • Wiener v. United States
    Terms
    Adjudication (administrative state) • Administrative judge • Administrative law • Administrative law judge • Administrative state • Arbitrary-or-capricious test • Auer deference • Barrier to entry • Bootleggers and Baptists • Chevron deference (doctrine) • Civil servant • Civil service • Code of Federal Regulations • Codify (administrative state) • Comment period • Compliance costs • Congressional Record • Coordination (administrative state) • Deference (administrative state) • Direct and indirect costs (administrative state) • Enabling statute • Ex parte communication (administrative state) • Executive agency • Federal law • Federal Register • Federalism • Final rule • Formal rulemaking • Formalism (law) • Functionalism (law) • Guidance (administrative state) • Hybrid rulemaking • Incorporation by reference • Independent federal agency • Informal rulemaking • Joint resolution of disapproval (administrative state) • Major rule • Negotiated rulemaking • Nondelegation doctrine • OIRA prompt letter • Organic statute • Pragmatism (law) • Precautionary principle • Promulgate • Proposed rule • Publication rulemaking • Regulatory budget • Regulatory capture • Regulatory dark matter • Regulatory impact analysis • Regulatory policy officer • Regulatory reform officer • Regulatory review • Rent seeking • Retrospective regulatory review • Risk assessment (administrative state) • Rulemaking • Separation of powers • Significant regulatory action • Skidmore deference • Statutory authority • Substantive law and procedural law • Sue and settle • Sunset provision • Unified Agenda of Federal Regulatory and Deregulatory Actions • United States Code • United States Statutes at Large
    Bibliography
    Agencies
    Retrieved from "https://ballotpedia.org/wiki/index.php?title=Business_Roundtable_v._SEC&oldid=9158781"