The Interfaith Center on Corporate Responsibility (ICCR) and As You Sow, represented by Democracy Forward, have filed a complaint against the U.S. Securities and Exchange Commission (SEC) over the SEC’s new No-Objection Policy adopted for the 2025-2026 proxy season.
Background: SEC's No-Objection Policy
With one exception, the policy at issue provides that a company need only submit an “unqualified representation” that it has a reasonable basis to exclude a shareholder proposal, and SEC staff will automatically respond with a “no-objection” letter without evaluating the adequacy of the representation or considering the proponent’s arguments, notwithstanding the process and requirements laid out in Rule 14a-8 of the Securities Exchange Act of 1934 (Exchange Act).
If a company does not include the unqualified representation in its exclusion notice to the SEC, the Division of Corporation Finance will not respond to the company's notice. For proposals excludable under Rule 14a-8(i)(1) as improper under state law, SEC staff will continue to engage in substantive review, based on the SEC’s determination that insufficient guidance exists on that ground.
Rule 14a-8 of the Exchange Act requires public companies to include qualified shareholder proposals in their proxy statements unless the company can demonstrate that the proposal falls within one or more of the 13 enumerated exclusions set forth in Rule 14a-8. Critically, the burden of persuasion rests on the company to demonstrate its entitlement to exclude a proposal under one of these enumerated exclusions.
As laid out in the complaint, the SEC’s Division of Corporation Finance issued a statement announcing its new No-Objection Policy for the 2025-2026 proxy season in November 2025 without any commission vote or public notice-and-comment process. The policy change was adopted notwithstanding SEC Chair Paul S. Atkins’ prior acknowledgment in an October 2025 speech that any formal changes to Rule 14a-8 would require notice-and-comment rulemaking.
As described in the complaint, the SEC offered two justifications for this change:
- “[R]esource and timing considerations” arising from the 2025 government shutdown
- The existence of an “extensive body of guidance” already available to companies and proponents on most exclusion grounds
The Plaintiffs' Challenge Under the Administrative Procedures Act
The plaintiffs argue that neither rationale provided by the SEC is credible. Plaintiffs first point to the fact that the SEC itself had, as recently as October 2025, announced its intention to resume reviewing Rule 14a-8 submissions once the government reopened. Second, plaintiffs argue that “the SEC has failed to reasonably explain how or why companies and proponents could fully rely on prior published guidance, particularly given that shareholder proposals’ subject matter and facts evolve over time.” Plaintiffs also criticize the new policy’s special treatment of proposals sought to be excluded under Rule 14a-8(i)(1), given that there has been no change in the law with respect to Rule 14a-8(i)(1) that would justify differential treatment.
In further support of their arguments, the plaintiffs point to then-Commissioner Caroline Crenshaw's public statement criticizing the new policy as “hand[ing] companies a hall pass to do whatever they want” and “effectively creat[ing] unqualified permission for companies to silence investor voices.”
The complaint asserts three counts under the the Administrative Procedures Act (APA).
Count I — Contrary to Law
In Count I of the complaint, the plaintiffs argue that the No-Objection Policy is unlawful and must be set aside and vacated, because it is contrary to the requirements of Rule 14a-8. Plaintiffs also point to the Accardi doctrine, which provides that an agency must abide by its own regulations.
The plaintiffs allege that the No-Objection Policy deviates from Rule 14a-8 in three material respects by:
- Eliminating the company’s burden of persuasion by issuing no-objection letters based solely on the company’s or counsel’s representation that it has a reasonable basis to exclude the proposal
- Improperly abdicating the SEC staff’s obligation to weigh the evidence submitted by both sides
- Negating the proponent’s right under Rule 14a-8(k) to submit a timely response that the SEC staff must then consider
Count II — Arbitrary and Capricious
In Count II of the complaint, the plaintiffs contend that when an agency changes an established policy, it must provide a reasoned explanation for the change and account for reliance interests developed under the prior regime.
Plaintiffs first argue that the SEC has offered no adequate explanation for why the government shutdown necessitated a permanent structural change (particularly given its stated intention to resume reviewing submissions post-shutdown). They further argue that the SEC has failed to account for decades of reliance by companies, proponents, and shareholders on the prior review process, and that the internal inconsistency in the policy’s justifications (simultaneously calling existing guidance both “extensive” and “nonbinding”) further underscores the absence of a reasoned basis for the policy change.
Count III — Failure to Observe Required Procedures
In Count III of the complaint, plaintiffs argue that because the No-Objection Policy is irreconcilable with multiple provisions of Rule 14a-8, it effectively amends Rule 14a-8, making it a substantive or legislative rule under the APA. Under Perez v. Mortgage Bankers Association, the APA requires agencies to use the same notice-and-comment procedures to amend a rule as they used to issue it in the first instance. Because Rule 14a-8 was promulgated through notice-and-comment rulemaking, any amendment (including an amendment by informal staff practice) requires the same procedure. The SEC undertook no such rulemaking, and the full commission did not vote to approve the new policy.
Relief Requested
The plaintiffs request that the court:
- Declare the No-Objection Policy contrary to law, arbitrary and capricious, and procedurally defective
- Set aside, vacate, and/or permanently enjoin the No-Objection Policy
- Award costs and reasonable attorneys’ fees
- Grant any other appropriate relief
Takeaways for Public Companies This Proxy Season
Companies already face reputational and litigation risk for excluding shareholder proposals under the SEC’s new No-Objection Policy. A total of five lawsuits have been filed against companies thus far this proxy season, with two companies settling by agreeing to include the proposal in their proxy materials and one settling by actually agreeing to implement the shareholder’s proposal. This latest lawsuit provides yet another reason why companies must carefully consider the potential consequences of excluding a shareholder proposal this proxy season. If the court ultimately vacates or enjoins the SEC’s No-Objection Policy, companies that have relied on no-objection letters to exclude shareholder proposals could face additional exposure.