Dive Brief:
- The Securities and Exchange Commission plans to stop responding to no-action requests “entirely … effective immediately,” the agency said in a statement Friday.
- The Division of Corporation Finance will cease responding to companies “with a letter indicating that it will not object if a company omits a proposal from its proxy materials,” according to the statement.
- The decision comes after the SEC sat out the bulk of the no-action process during the 2025-26 proxy season. Investor advocates have since sued the agency, alleging the change violates the Administrative Procedure Act.
Dive Insight:
The decision to functionally remove itself from the no-action process comes as the SEC is considering broader changes to Rule 14a-8, which governs the shareholder proposal process. The agency also said that the Division of Investment Management — which reviews no-action requests for investment companies — “will take a substantially similar approach.”
While the SEC will no longer respond to no-action requests, the agency said companies are still required to submit notices to the agency “containing the information required by the rule when they intend to exclude shareholder proposals from their proxy materials.”
“Although the staff ‘has for many years engaged in the informal practice of expressing its enforcement position’ in response to notices submitted under Rule 14a-8(j), the Commission has also long recognized that ‘[n]o response or other action by the Commission or its staff is required in regard to such communications,’” the SEC said in its statement, citing 1976 procedures for informal staff advice regarding shareholder proposals.
The agency said the pullback from the no-action process will allow the Division of Corporation Finance to focus resources on reviewing Securities Exchange Act filings. The division said the changes were also done “in light of the extensive body of guidance from the Commission and the staff available to both companies and proponents on Rule 14a-8.”
SEC Chair Paul Atkins hinted that the agency would continue to take a hands-off approach to the process in a July speech at a corporate governance conference. At the time, he said “the staff’s absence this season did not create the chaos that many feared,” and his ““greatest takeaway is that the Commission staff’s interposition between companies and shareholder proponents is unnecessary to effectively and efficiently resolve whether shareholder proposals should be included in proxy statements.”
Atkins noted that six lawsuits arose from the change, but said it represented a small portion of excluded proposals.
Steven Rothstein, chief program officer for sustainability nonprofit Ceres, said in an emailed statement to ESG Dive Friday that the move from the Division of Corporation Finance “will hurt both investors and issuers” of shareholder proposals.
“The practice of filing shareholder proposals has been in place for decades, as has the SEC's role in mediating companies' requests to exclude proposals,” Rothstein said. “This abdication by the SEC of its longstanding role as neutral arbiter of shareholder proposals will damage the traditional management-shareholder dialogue."
The agency said in the latest federal regulatory agenda that it plans to propose amendments to the shareholder proposal rule by October, and Atkins said in the same July speech that the agency is “holistically evaluating the rule itself.”
Last month, a group of investor advocates filed a regulatory petition with the agency asking for the SEC to “largely retain” Rule 14a-8 in any amendments and suggested alternative fixes to the process. The group warning against rescinding the rule entirely included Ceres, the U.S. Sustainable Investment Forum, the Interfaith Center on Corporate Responsibility, the Shareholder Rights Group and For the Long Term, as well as New York State Comptroller Thomas DiNapoli.
