A U.S. appellate court on Tuesday upheld a Securities and Exchange Commission plan that allows small companies to sell stock to big investors without satisfying tough disclosure rules.

Qualified investors may buy up to $50 million in securities from certain companies without first seeing detailed financial data that everyday investors would expect in a public offering.

Such rules were envisioned in the Jumpstart Our Business Startups Act of 2012 as a way to stimulate investment in smaller companies. Officials in Massachusetts and Montana objected, though, saying the SEC standard could harm the public.

The U.S. Court of Appeals for the District of Columbia on Tuesday sided with the SEC and said the agency had "complied with its statutory obligation" to protect investors while meeting the mandate of the JOBS Act.

The court ruled that the SEC had a right to tailor registration requirements and that the new standard would supersede state securities rules.

The court brushed aside arguments that the federal standard hindered states' ability to protect everyday investors.

The SEC may scale back disclosure rules for small companies that are in an early stage of reaching the market but the agency rarely asserted that power, the court noted in its decision.