In a historic change, SEC proposes to rescind Rule 14a-8 and make other modifications to the proxy rules

The evolution of Rule 14a-8

The predecessor of Rule 14a-8, Rule X-14A-7, was adopted by the Commission in 1942. The rule has evolved over the years, including with the inclusion of additional bases on which companies could permissibly exclude shareholder proposals from their proxy statement. See Appendix I, where certain of the changes discussed in the Release are summarized.

In addition, the staff of the Commission regularly provided guidance on the interpretation and application of Rule 14a-8 through the issuance of staff legal bulletins. Between 1999 and 2025, the staff issued 14 such bulletins, of which four were subsequently rescinded.^[2]

Getting out of the Rule 14a-8 no-action letter business

In addition to its substantive grounds for excluding shareholder proposals, Rule 14a-8 has certain procedural provisions. If a company intends to exclude a proposal, it is required to notify the Commission, with an explanation supporting the exclusion (Rule 14a-8(j)). Implying that the Commission or its staff will review and make a determination on the appropriateness of an exclusion, the rule asks, “Who has the burden of persuading the Commission or its staff that my proposal can be excluded?”; it answers, “Except as otherwise noted, the burden is on the company to demonstrate that it is entitled to exclude a proposal” (Rule 14a-8(g)). This has led to a cottage industry of public company requests for assurance from the staff—so-called no-action letter requests—regarding a company’s decision to exclude a shareholder proposal. The staff addressed well over 100 such no-action letter requests, and sometimes many more, each year.^[3]

Perhaps as a harbinger of the proposal to rescind Rule 14a-8 in its entirety, on November 17, 2025, the Commission announced that its staff would no longer respond to no-action requests under Rule 14a-8 nor express views on the basis for exclusion of a shareholder proposal.^[4] The one exception was exclusions pursuant to Rule 14a-8(i)(1) on the grounds that a proposal was an improper subject for shareholder action under state law. Under this policy, companies seeking to exclude a shareholder proposal would still have to notify the Commission of the intended exclusion 80 calendar days before the filing of its definitive proxy statement. 

On August 14, 2026, the Commission announced that it would no longer respond to any no-action letter requests relating to Rule 14a-8, including Rule 14a-8(i)(1).^[5] While acknowledging that the staff had for many years responded to such requests, the Commission explained the change as necessary “to focus Division [of Corporation Finance] resources on the review of Securities Act and Exchange Act filings, including those reviews that are statutorily required, for the protection of investors and facilitation of capital formation.” The Commission also noted that there was an extensive body of guidance from the Commission and its staff on which companies and shareholder proponents could rely.^[6]

The Commission is now proposing to exit the Rule 14a-8 shareholder proposal process entirely. In the Release, the Commission discusses its reasons for the rescission of Rule 14a-8, including that it exceeds the scope of the Commission’s authority under Section 14(a) of the Exchange Act and that the rule should be rescinded for multiple policy reasons. 

The authority of the Commission

Section 14(a) provides:

It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 12 of this title.

Although the statute is written broadly, the Commission’s view is that it should be interpreted in context as authorizing the Commission “to prohibit false or misleading statements in a proxy solicitation and to promulgate disclosure requirements ensuring that shareholders are adequately informed of the proposals on which they may vote under State law and the voting positions for which their proxies would be used.” In the view of the Commission, the statute does not authorize the regulation of the scope of voting rights under state law. The substantive regulation of what can and cannot be proposed by shareholders for consideration at the annual meeting, in the view of the Commission, is just such a state law matter that lies outside the ambit of the Commission’s authority under Section 14(a).^[7]

The policy reasoning 

The Release also advances a number of policy reasons for dispensing with Rule 14a-8: 

• The rule was initially adopted with the understanding that the cost to the companies of including shareholder proposals in their proxy materials was small, many proposals were supported by management or received meaningful shareholder support, and the volume of the proposals was small, but this has not proven to be the case. 
• Shareholders may submit proposals and use the rule to gain leverage with the company in negotiations or to advance private interests that in many cases may not be shared by a company’s shareholders at large. 
• The rule puts the Commission in the position of applying state law, which should be left to state legislatures and the courts.
• The existence of the federal rule has inhibited the development of state law governing standards for submission of shareholder proposals.^[8]

For these reasons, the Commission is also opposed to retaining Rule 14a-8 even in a modified form.

In tandem with its proposed rescission of Rule 14a-8, the Commission is proposing to modify Rule 14a-4(c). The rule specifies the conditions under which a proxy holder, and in particular the company, is authorized to vote on behalf of a shareholder on a matter that is not on the proxy card. 

Under the current rule, in the case of annual meetings, a proxy may confer on the company discretionary voting authority:

• If the company has not received timely notice of the proposal—ordinarily 45 days before the date on which the company sent its proxy materials for the prior year’s meeting
• If the company has received timely notice, (i) the company’s proxy statement describes the proposal and how the company intends to vote, and (ii) the proponent has not timely provided the company with a written statement that the proponent intends to deliver a proxy statement and form of proxy to the holders of shares of at least the percentage required to approve the proposal, and thereafter provided the company with a statement from a proxy solicitor that it has taken steps to do so.^[9]

Considering that the elimination of Rule 14a-8 may result in more shareholders conducting their own solicitation, the Commission is proposing to amend Rule 14a-4(c) to liberalize the circumstances under which a company may exercise discretionary voting authority. Specifically, as proposed, a company would be allowed to exercise discretionary authority even if a shareholder timely informed the company that it would be delivering proxy materials, subject to these conditions: (i) The company’s proxy statement includes a brief description of the shareholder proposal and how the company intends to vote, (ii) there is a cross-reference on the company’s proxy card to this disclosure in the company’s proxy statement, and (iii) the proxy card includes a checkbox that if checked by a shareholder would preclude the company from exercising voting discretion. If there is more than one shareholder proposal, the company could include a single checkbox, barring the company from exercising discretion on all the proposals, or multiple checkboxes, allowing shareholders to selectively withhold consent to specific proposals. 

The Commission is also proposing to revise the provisions of Rule 14a-4(c) addressing the period before which advance notice of a shareholder proposal would be timely, so as to preclude the unconditional exercise by the company of discretionary voting authority. That period would be determined by a company’s advance notice bylaws or the like or applicable state law, and only in the absence of such authority would the rule default to the 45-day period referred to above. Certain other changes, in respect of filing preliminary proxy materials and conforming to the elimination of Rule 14a-8, are also being proposed.

The proposed change to Rule 14a-4(c) would give management default rights to exercise proxy authority in certain circumstances. A no-action letter issued by the staff of the Division of Corporation Finance on September 29, 2026, regarding so-called issuer voluntary retail voting programs (IVRVPs) would also facilitate default voting in favor of management, subject to prescribed conditions.^[10]

Under an IVRVP, retail shareholders can provide standing instruction to vote their shares as recommended by a company’s management. Participating shareholders may provide standing instructions as to (i) all matters or (ii) all matters except contested director elections or any acquisition, merger, or divestment that under applicable state law or stock exchange rules requires shareholder approval. The staff stated that it would not object to an IVRVP subject to certain conditions, including that the shareholders continue to receive all proxy materials; that shareholders will be able to override their standing instructions and will be able to vote using the proxy materials (which would constitute an override); that shareholders will be able to opt out of their standing instructions at any time and at no cost; that shareholders will receive annual reminders about the program and their rights to cancel; and that the issuer will make full disclosure of the program on its website and in its proxy statement.

Rule 14a-8, in its various guises, is almost as old as the Securities Exchange Act, having first been enacted a scant eight years after the act itself. The rule was by no means a sleeper, having undergone numerous revisions and having been the subject of numerous staff legal bulletins over the years. The reaction to the proposal to eliminate Rule 14a-8 thus far has been mixed,^[11] and it is too early to tell how positions on the rule proposal, pro or con, will ultimately line up. 

Whether Rule 14a-8 will survive in some compromise form or be completely discarded remains to be seen. It is also an open question whether, as suggested by the Commission, the states will step into the breach created by a rescission, or perhaps substantial revision, of Rule 14a-8 with rules of their own to regulate shareholder proposals. With Rule 14a-8, at least in its current form, unavailable to them, shareholder proponents may need to devise other means, short of conducting a costly proxy solicitation of their own, to focus the attention of other shareholders and management on their causes. There seems little doubt, however, that the shareholder proposal process as it has existed over the last several decades is now a thing of the past.

Evolution of Rule 14a-8: Selected rule changes referenced in the Release

[1] In a companion release titled “Proxy Solicitation Modernization” (Release Nos. 33-11439; 34-106385; 39-2566), the SEC proposed certain other changes to the proxy rules, unrelated to the shareholder approval process. These include elimination of the requirement to deliver annual reports to shareholders; elimination of the requirement for a minimum of 20 business days between sending a proxy statement and the shareholder meeting when documents are incorporated by reference; rescission of Rule 14a-6(g), which requires submitting a notice of exempt solicitation in certain instances; shortening the broker search period, wherein an issuer must give advance notice of the record date for a shareholders meeting to brokers and other nominees, from 20 business days to five business days; and requiring contact information on Schedule 14A, under which proxy statements are filed, and Schedule 14C, under which consent statements are filed. 

[2]  See https://www.sec.gov/rules-regulations/staff-guidance/staff-legal-bulletins. 

[3]  See https://www.sec.gov/rules-regulations/shareholder-proposals/no-action-responses-issued-under-rule-14a-8-prior-seasons. 

[4]  See https://www.sec.gov/newsroom/speeches-statements/statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season. 

[5]  For so long as Rule 14a-8 remains in effect, which may be through the 2027 proxy season, in the absence of staff guidance, companies in receipt of shareholder proposals will need to evaluate the litigation risks and investor relation consequences of excluding the proposals.

[6] In Interfaith Center on Corporate Responsibility v. Securities and Exchange Commission, 1:26-cv-00957 (D.D.C. filed March 19, 2026), plaintiffs Interfaith Center on Corporate Responsibility and As You Sow argued the change in the Commission’s policy violated the Administrative Procedure Act in that it bypassed the act’s notice and comment rule-making procedures. The complaint is available at https://storage.courtlistener.com/recap/gov.uscourts.dcd.290561/gov.uscourts.dcd.290561.1.0.pdf. 

[7] The Commission concedes that the decision of the appeals court in SEC v. Transamerica, 163 F.2d 511 (3d Cir. 1947), could be read as endorsing a more expansive reading of Section 14(a). If so, according to the Release, the Commission disagrees with the court’s reading (Release at n. 103).

[8]  The Commission observed that “with the recent exception of Texas, no State has adopted legislation governing shareholder proposals in more than 80 years since Rule 14a-8 was first adopted.” The Commission is referring here to Section 21.373 of the Texas Business Organizations Code, adopted in 2025. The statute permits Texas-incorporated companies to amend their bylaws to prohibit shareholders from submitting a shareholder proposal unless the shareholder has held the lesser of $1 million in market value or 3% of the company’s voting shares for at least six months and solicits holders of at least 67% of the voting power entitled to vote on the proposal.

[9]  There are also certain other enumerated grounds for granting discretional voting authority—for example, matters incident to the conduct of a meeting.

[10]  No-action letter Tesla, Inc. (September 29, 2026), available at https://www.sec.gov/rules-regulations/no-action-interpretive-exemptive-letters/division-corporation-finance-no-action/tesla-inc-092926. The no-action letter states that the staff’s position applies to any issuer operating an IVRVP.

[11] For example, the U.S. Chamber of Commerce is strongly supportive of the SEC—see https://www.uschamber.com/finance/u-s-chamber-welcomes-secs-rule-14a-8-shareholder-proposal-rulemaking#:~:text=%E2%80%94%20The%20U.S.%20Chamber%20of%20Commerce%20today%20issued,the%20U.S.%20Chamber%27s%20Center%20for%20Capital%20Markets%20Competitiveness—while the Council of Institutional Investors has been sharply critical of the proposal to rescind the rule; see https://www.cii.org/sept-16-2026-proposed-recission-rule-14a-8. Other commenters have asked the SEC to extend the 60-day comment period, which expires November 20, 2026. See, e.g., comments of Thomas P. DiNapoli, New York State Comptroller, and Carin Zelenk, Director Capital Strategies, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), available at https://www.sec.gov/rules-regulations/public-comments/s7-2026-32?page=0.