US appeals court voids SEC rollback of proxy voting advice rule

FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo

(Reuters) - A federal appeals court on Wednesday struck down part of the U.S. Securities and Exchange Commission's 2022 rescission of rules that critics said impeded the independence of firms that advise investors on how to vote in corporate elections.

By a 3-0 vote, the 5th U.S. Circuit Court of Appeals said the SEC's explanation for rescinding rules adopted just two years earlier was "arbitrary and capricious and therefore unlawful."

The court vacated the SEC rescission of "notice-and-awareness" conditions requiring that proxy firms make their advice available to companies no later than when they notify clients, and that clients be notified of companies' written responses to their advice.

An SEC spokeswoman said the regulator is reviewing the decision and will determine its appropriate next steps.

(Reporting by Jonathan Stempel in New York, editing by Deepa Babington)