In November 2025, the SEC’s Division of Corporation Finance (the “Division”) announced a significant change to its no-action process for the 2026 proxy season, indicating that it would not substantively review or respond to no-action requests by companies seeking to exclude shareholder proposals from their proxy materials, except for requests challenging whether a proposal is a proper subject for shareholder action under state corporate law. Under this new process, a company desiring a non-substantive “no objection” response from the SEC staff must include a representation that it has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), prior published guidance, and/or judicial decisions.
This change has now led to litigation. On February 17, 2026, the New York City Pension funds—consisting of the New York City Employees’ Retirement System, the Teachers' Retirement System of the City of New York, the New York City Police Pension Fund, and the New York City Board of Education Retirement System—filed suit against AT&T Inc. in the U.S. District Court for the Southern District of New York. The funds allege that AT&T unlawfully excluded their shareholder proposal, which requests that AT&T adopt a policy to publicly disclose its Consolidated EEO-1 Report detailing workforce statistics on race, ethnicity, and gender. AT&T cited the “ordinary business exclusion” under Exchange Act Rule 14a-8(i)(7) as its only basis for excluding the proposal and, consistent with the SEC’s new policy, received a non-substantive “no objection” letter from the Division the very next business day after submitting its no-action request. In their complaint, the funds seek a declaratory judgment that AT&T’s decision to omit the proposal violates Section 14(a) of the Exchange Act and Exchange Act Rule 14a-8, an injunction preventing AT&T from soliciting shareholder proxies without including their proposal, and an award of costs and attorneys’ fees.
This lawsuit illustrates the real-world consequences of the SEC’s modified no-action process. While the Division will issue “no objection” letters based solely on a company’s representation of a reasonable basis for exclusion, such letters do not insulate companies from shareholder litigation. Companies should seriously consider whether they have a reasonable basis to exclude a proposal bearing litigation risk in mind.
