A appeals court rejected a new Securities and Exchange Commission rule designed to make it easier for shareholders to nominate directors to corporate boards on Friday.

In a major blow to the SEC, the U.S. Court of Appeals for the District of Columbia Circuit said the SEC's rule was arbitrary and capricious.

The SEC delayed implementing the rule after the U.S. Chamber of Commerce and the Business Roundtable filed its lawsuit, charging that the SEC had failed to adequately assess the rule's costs.

(Reporting by Sarah N. Lynch)