Securities Regulation Daily Wrap Up, PROXIES—SEC warns shareholder interest groups and asset managers about beneficial ownership implications of certain forms of advocacy, (Oct 8, 2026)

By Mark S. Nelson, J.D.

The report made no specific findings of wrongdoing but strongly suggested that advocacy around proxy votes could, among other things, result in loss of Schedule 13G status.

The SEC’s Divisions of Enforcement and Corporation Finance issued an Exchange Act Section 21(a) report regarding the activities of certain shareholder interest groups and other investors and asset managers, some of them among the largest in the U.S., and whether their allegedly coordinated efforts to elect dissident directors at ExxonMobil Corporation may have violated federal securities laws regarding beneficial ownership reporting and the use of Schedule 13G (passive investors) versus Schedule 13D (persons seeking to change or influence companies). Although the report made no specific findings about wrongdoing, it could further limit engagements with companies, consistent with the current Administration’s approach taken via multiple sets of guidance over nearly the past two years. The report said the Commission would not pursue an enforcement action, but went on to caution shareholders, investors, and asset managers about application of the federal securities laws to their activities (Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: Climate Action 100+ and the Election of Directors at the May 2021 Annual Meeting of ExxonMobil Corporation, Exchange Act Release No. 106611 (Oct. 7, 2026)).

Climate and the Exxon 2021 vote. According to the report, the group Climate Action 100+ (CA 100), a climate change advocacy group, sought members, which included at least two of the biggest U.S. asset managers, and then pressured some members to engage on the climate issue with Exxon, including through other entities such as Ceres, CA100’s North American supporter. Although not all of the largest U.S. asset managers joined CA100, SEC staff also focused on whether those entities, along with ones that did join CA100, could potentially lose their Schedule 13G status, a filing status that applies to passive investors whose efforts do not have a purpose or effect of changing or influencing control of a company.

The report also said that CA100’s “flagging” of proxy votes, along with its practice of designating “lead investors,” could constitute an effort to coordinate that could further raise concerns about beneficial ownership reporting obligations.

The report did not address fiduciary duty issues regarding asset managers, and it suggested that the issues discussed were not limited to those groups and asset managers named in the report.

The report emphasized how beneficial ownership reporting rules and Schedule 13D-G status can become issues for groups that may engage with a particular company, including through an intermediary. To this end, the report cautioned that shareholders’ denial of the existence of a “group” may not be enough to avoid satisfying the definition of “group.” The report said that beneficial owners who do not want to join a group should proactively take steps to avoid group membership. Lastly, the report said that shareholders should consider how joining a group could affect their Schedule 13D-G filing status.

Analysis of groups. The report first noted “concerns” about whether the conduct of members of CA100 resulted in the formation of a group that beneficially held more than 5 percent of Exxon’s common stock. The report said disclosure is the key and that a group can form for reasons other than control or influence because a group need only have a common objective. Group formation is a fact-based question that does not easily focus on a specific checklist of factors, added the report.

With respect to CA100, said the report, coordinating its members’ voting decisions on specific proposals within the scope of their initiative, including director elections, which involved “flagging” issues, negative publicity, and the pressuring of noncompliant members, could raise concerns about whether a group existed.

Moreover, although BlackRock, Inc. and State Street Corporation entered into signing statements that purported to disclaim coordination in connection with proxy voting, the report said there was evidence suggesting that BlackRock and State Street engaged in discussions with Ceres regarding ExxonMobil proxy votes in 2020 and 2021.

“A disclaimer by a member of the organization regarding its potential participation in a ‘group’ would not prevent the formation of a group if, despite such a disclaimer, the evidence shows the existence of an explicit or implicit agreement among the organization’s members regarding the voting of the issuers’ shares,” explained the report.

But “conduct that is merely incidental, routine, or otherwise non-volitional,” without more, would not likely indicate a group. However, investors must be careful to avoid the “scheme to evade” rule, which the report said could be triggered by providing support to an intermediary that then provides financial or other advisory support to an activist.

“While the investigation did not identify any evidence of such arrangement with respect to Engine No. 1 or any other entity, the Commission emphasizes that intermediary based arrangements cannot be used to shield coordinated actions and influence from the disclosure obligations imposed by Sections 13(d) and 13(g),” said the report.

Schedule 13G eligibility. The report also questioned whether disclosure obligations could have applied for persons engaged in the investigated activities that may have had the purpose or effect of changing control of a company or influencing the company’s policies. The main difference is that passive investors can file a Schedule 13G instead of the more onerous Schedule 13D. The report noted that the analysis of whether a group formed is separate from whether a shareholder may use Schedule 13G or must use Schedule 13D.

The report noted that the operative regulatory language is “purpose, or with the effect, of changing or influencing the ‘control’” of a company. “Control,” said the report, “means “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.”

For purposes of the CA100 investigation, SEC staff noted that an organization that has as its purpose a “board-refresh initiative” may be pursuing a path that inherently has control implications. Said the report: “[w]hen the organization’s objectives include a board-refresh undertaking, the coordinated efforts by multiple investors (whose combined holdings exceed five percent) could implicate a change in control and is inconsistent with the ‘no-control-intent’ requirements set forth in the certifications underpinning Schedule 13G eligibility.”

Moreover, an organization that does not have an explicit board-refresh initiative, could nevertheless potentially violate federal securities laws if it becomes a member of an organization that “engages on specific issuers and targets specific management or policy outcomes.” This scenario, said the report, could implicate control issues.

The report also targeted index funds, which typically passively invest in companies and make only incremental changes in ownership to reflect adherence to a benchmark index. Here, the report suggested that a potential issue could be compliance with rules requiring shares to be held in the “ordinary course.”

Said the report: “[a] manager of an index fund that directs the acquisition, disposition, and voting of securities held by the fund should therefore carefully evaluate whether joining a coordinated effort or initiative unrelated to the fund’s benchmark performance, including through participation in an intermediary-driven organization such as CA100, aligns with Rule 13d-1(b)’s ‘ordinary course’ requirement.”

While activist shareholders may view the report as potentially having a further chilling effect on engagements with companies, the report’s concluding section, to some extent, attempted to allay those fears by noting that engagements generally can continue in the form of ordinary-course engagements and that members of organizations can limit their membership to avoid group status. In these instances, said the report, group membership parameters must be “sufficient” and “respected,” while ordinary course engagements cannot morph into “coordinated conduct that departs from ordinary-course practices.”

The release is No. 34-106611.

Companies: Climate Action 100+; ExxonMobil Corporation; BlackRock, Inc.; State Street Corporation; The Vanguard Group; Ceres; Engine No. 1

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