SEC New No-Action Policy and Last Minute Challenge to CA's Climate Disclosure Law
SEC Announces Step-back from No-Action Feedback this Proxy Season
The Securities and Exchange Commission (SEC) released a press release this morning announcing that the Division of Corporation Finance (CorpFin) will not respond to no-action requests to exclude a proposal under 14a-8 this proxy season.
Reasoning: The SEC cited resource and timing considerations as its primary reason for this new policy, accentuating the constraints placed on the agency from the government shutdown and the hefty load of other items that require the staff’s attention.
New process: For any no-action requests, besides the (i)(1) exception (see below), for which companies would like to receive SEC feedback, the company must submit, alongside its request, “reasonable” evidence as to why the company believes the proposal should be excluded, either from prior published guidance and/or judicial decisions.
What does this mean: Effectively, the SEC has stepped back from its role of enforcement in the shareholder proposal process. Companies will now have a strong incentive to submit no-action notifications for most, if not all, shareholder proposals as CorpFin “has determined to not respond to no-action requests for, and express no views on, companies’ intended reliance on any basis for exclusion of shareholder proposals.”
How shareholders will be impacted: Without checks from the SEC, shareholders will have to sue companies in order to include proposals on the proxy. Other actions include voting against board directors.
Exception: The one exception to this new policy is that the SEC will provide feedback to no-action requests filed under Rule 14a-8(i)(1) due to “recent developments regarding the application of state law” and the “[in]sufficient body of applicable guidance for companies and proponents to rely on.” This is in reference to Chair Paul Atkins' recent stipulations that non-binding proposals qualify under the rule 14a-8(i)(1) exemption as they do not meet the definition of “proper subjects” in Delaware law.
What We are Watching This Week
The U.S. Chamber of Commerce (the Chamber) has filed a last-minute appeal to the Supreme Court to pause California’ corporate climate disclosure laws until the Ninth Circuit hears their case in October 2026. The first statutory reporting deadline for the laws is January 1, 2026. The Chamber argues the laws violate their First Amendment rights by compelling companies “to speak on the deeply controversial topic of climate change.”
The Chamber’s statement: “Without this Court’s immediate intervention, California’s unconstitutional efforts to slant public debate through compelled speech will take effect and inflict irreparable harm on thousands of companies across the country.”
CARB Workshop: The California Air Resources Board (CARB) is holding a public workshop to discuss its rule-making process with stakeholders on Tuesday at 9:30am PT / 12:30pm ET. We will be sure to share a read-out in Friday’s newsletter.