On March 19, 2026, two investor advocacy groups filed a lawsuit in U.S. District Court for the District of Columbia seeking to vacate a Securities and Exchange Commission (SEC) policy that changed how the agency handles shareholder proposals. The lawsuit challenges what the groups called the SEC’s November 2025 No-Objection Policy, which replaced the agency’s longstanding review of shareholder proposal disputes with a process based on company representations rather than independent SEC analysis.

As You Sow and the Interfaith Center on Corporate Responsibility said the SEC did not follow required rulemaking procedures under the Administrative Procedure Act (APA) when it altered how Securities Exchange Act Rule 14a-8 is implemented. The rule governs when companies can exclude shareholder proposals from proxy materials — the documents companies send to shareholders before annual meetings that list items for a vote and provide voting instructions.

The dispute centers on the SEC’s November 2025 decision to stop issuing no-action letters — guidance companies rely on when deciding whether they can exclude shareholder proposals from proxy materials. The SEC said the change was due to resource and timing constraints, including a backlog of filings following a 2025 federal government shutdown, and also pointed to existing guidance as a reason to limit staff review. SEC Chairman Paul Atkins said the agency would use the current proxy season to evaluate whether to resume its role in reviewing these requests.

Under the policy, SEC staff issue “no-objection” letters based only on a company’s representation that it has a basis to exclude a proposal and do not evaluate the company’s reasoning or consider shareholder responses in most cases.

The groups argued the policy effectively changes how Rule 14a-8 operates by removing the SEC’s role in evaluating disputes and limiting shareholders’ ability to respond, without using the rulemaking procedures required under the APA.

The case focuses on how the SEC sets policy that governs shareholder proposals and whether it must use formal rulemaking to change long-standing practices. A ruling against the agency could require it to restart the no-action process or adopt changes through notice-and-comment procedures.

The shift has also moved more disputes into courts. Investors have filed lawsuits to force companies to include proposals, including a case involving New York City pension funds and AT&T that ended in a settlement allowing a proposal to proceed.

The complaint cites examples in which the SEC issued a no-objection letter before shareholders had an opportunity to respond, including a January 2026 case involving Royal Gold, Inc.

Rule 14a-8 allows shareholders to submit proposals for inclusion in company proxy statements and permits companies to request SEC staff confirmation that a proposal may be excluded. The SEC has historically provided that guidance through no-action letters indicating whether staff would recommend enforcement if a company omits a proposal.

In November 2025, the SEC’s Division of Corporation Finance said it would not respond to most no-action requests for the 2025–26 proxy season, limiting responses to certain state law questions. Atkins later said the change followed a 42-day federal government shutdown that left staff with a backlog of time-sensitive filings, including registration statements.

The APA generally requires federal agencies to follow notice-and-comment procedures when issuing or changing rules, though agencies may adjust internal practices or guidance without formal rulemaking.

The plaintiffs asked the court to vacate the policy; as of the filing, no ruling had been issued.

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