SEC Proposes Shareholder Proposal Rule Rescission and Proxy Updates

The Securities and Exchange Commission on Sept. 16, 2026, proposed to rescind Rule 14a-8 under the Securities Exchange Act of 1934, the federal rule that addresses when companies must include shareholder proposals in their proxy materials, stating that the rule exceeds the scope of the Commission’s statutory authority and intrudes into matters of state law. The Commission issued two proposing releases related to its proxy rules: one covering the Rule 14a-8 rescission together with amendments to Rule 14a-4(c) governing discretionary proxy voting authority, and a separate release proposing amendments to modernize the proxy solicitation process.

The Commission outlined independent policy reasons for the proposed rescission beyond the statutory-authority question. Many of the justifications for adopting the rule either have not been substantiated in practice or are less compelling today, the Commission stated, and the rule has had unintended consequences, including the implication of federal preemption that may have discouraged states from developing their own laws governing shareholder proposals. Rescinding Rule 14a-8 would leave determinations about the role of shareholder proposals to state law and company governing documents.

A fact sheet accompanying the proposing release lists three such unintended consequences: Rule 14a-8 has become a mechanism for influencing the interactions between companies and their shareholders in ways inconsistent with the rule’s original purpose; the rule places the Commission in the position of making judgments about the application of state law that are best left to other actors; and the presence of a federal rule has inhibited the development of state law and private ordering. The proposing release discusses the scope of the Commission’s authority under Section 14(a) of the Exchange Act.

In a statement, Chairman Paul S. Atkins said the proposals reflect two of his highest regulatory priorities: ensuring that the Commission does not improperly intrude into state corporate law when applying the federal securities laws, and updating the Commission’s rules to reflect developments in market practice and technology since the rules were adopted or last amended. Atkins said that absent authorization from Congress, which he said has not been granted for shareholder proposals, the Commission has no authority to determine which matters are a proper subject for a shareholder vote. “This issue of corporate governance must be resolved by the state in which a company domiciles,” he said, adding that the proposed rescission “would not eliminate the concept of shareholder proposals and is not an attempt by the Commission to silence shareholders.”

Atkins said further refining the rule, such as changing ownership thresholds to submit a proposal or clarifying what constitutes ordinary business to exclude a proposal, would continue to ensnare the Commission in making judgments about matters that should be governed by state law. Describing the current period as one of increased competition among states for corporate domicile, he said the proposed rescission should, if adopted, provide states with both the legal clarity and the motivation to implement their own ideas for a shareholder proposal framework.

Discretionary Voting Authority Amendments

Rule 14a-4(c) currently prohibits a company, under certain circumstances, from voting proxies it receives on shareholder proposals that are submitted outside Rule 14a-8 and will be presented at a shareholder meeting but are not included in the company’s proxy materials. According to the fact sheet, an unintended consequence of this prohibition is that companies may feel compelled to include these proposals on their proxy cards even though the federal proxy rules and existing state law do not require their inclusion.

The proposed amendments would broaden the circumstances in which a company may exercise discretionary proxy voting authority and would give shareholders the ability to elect to prevent the company from exercising such authority with respect to their individual shares. Atkins said companies currently hold this discretionary authority for timely received proposals only if the shareholder proponent does not solicit a requisite percentage of shares, and that other shareholders cannot opt out. He said the amendments are independent of the proposed rescission but that, if Rule 14a-8 is ultimately rescinded, shareholders may be more likely to file their own proxy materials to solicit votes for their proposals.

Proxy Solicitation Modernization

In the separate release, the Commission proposed amendments that would eliminate the requirement that companies deliver an annual report to security holders, eliminate the delivery deadline when documents are incorporated by reference into a proxy statement, eliminate the requirement and the ability to submit Notices of Exempt Solicitation, and shorten the minimum broker search period from 20 business days to five business days. The federal proxy rules are the framework under Regulation 14A that governs how companies and others solicit proxies to vote at shareholder meetings, and a second fact sheet states that it has been decades since many of the rules were adopted or amended.

For companies that have a Form 10-K already on file for their most recent fiscal year, the proposal would eliminate the need to comply with separate annual report to security holders disclosure requirements. The information required in that report largely overlaps with the Form 10-K, according to the fact sheet; both must include financial statements and management’s discussion and analysis of financial condition and results of operations. The proposal would also eliminate the stock performance graph in annual report filings for all companies other than investment companies, which would provide the graph in their Forms 10-K.

The proposal would eliminate the requirement in Schedule 14A and Forms S-4 and F-4 to send a proxy statement or prospectus to shareholders at least 20 business days before a shareholder meeting if the document incorporates information by reference. Atkins said this requirement predates companies filing on EDGAR and no longer serves any investor protection considerations because shareholders can quickly access those documents on EDGAR.

The proposal would rescind Rule 14a-6(g), which currently requires a shareholder owning more than $5 million of a company’s securities to submit a Notice of Exempt Solicitation on EDGAR if it conducts certain written exempt solicitations. The amendments would eliminate the notices altogether, whether required or voluntary, and the fact sheet states that voluntary notices constitute the vast majority of such notices submitted in recent years. The proposal is intended to reduce potential investor confusion and improve the accessibility of information on companies’ EDGAR pages.

The proposal would reduce Rule 14a-13’s timeframe for initiating a broker search in connection with a shareholder meeting from 20 business days before the record date to five business days. In a broker search, companies ask their record holders for the number of proxy materials needed to forward to customers who are beneficial owners. Atkins said the current timeframe, which the Commission adopted in 1983, has become outdated with technological advancements.

The proposed amendments would also revise the cover pages of Schedule 14A and Schedule 14C to require contact information for a representative who can respond to questions or comments regarding the filing, and would make technical amendments to remove obsolete references and correct typographical errors in the proxy rules.

The public comment periods for both proposals will remain open for 60 days following publication of the proposing releases in the Federal Register. Atkins said he looks forward to receiving and reviewing the public’s feedback on both proposals.