Business Roundtable v. Securities and Exchange Commission
United States Court of Appeals for the District of Columbia Circuit
905 F.2d 406 (1990)
The New York Stock Exchange (exchange) had a long-standing rule that required listed companies to provide votes to their shareholders at a ratio of one vote per share of common stock. Due to enforcement difficulties, the exchange filed a petition with the Securities and Exchange Commission (SEC) (defendant) to change the rule. The SEC did not approve the rule change and instead adopted its own rule. The SEC’s Rule 19c-4 barred a national securities exchange or association, that is, a self-regulating organization (SRO), from listing stock for corporations that took corporate actions to nullify, restrict, or reduce the per share voting rights of stockholders. Under the rule, corporate actions affecting shareholders’ per share voting rights constituted disenfranchisement, even if the actions had been approved by shareholder vote conducted under a one share-one vote procedure. The Business Roundtable (plaintiff) petitioned the D.C. Circuit to review Rule 19c-4, arguing that the SEC exceeded its regulatory authority under the Securities Exchange Act (Exchange Act).
Rule of Law
Holding and Reasoning (Williams, J.)
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