SEC Staff Allows Retail Investors to Vote With the Board
The SEC Division of Corporation Finance's Office of Mergers and Acquisitions cleared Tesla and other issuers to allow retail investors to vote with the board. In a no-action letter to Tesla, the Office said it would not recommend enforcement action under seven proxy rules if Tesla implements the proxy program whereby retail investors can choose to have their shares voted as the board recommends on some or all proxy matters, as described in the company's request letter. The Office's position also applies to any issuer that operates the proxy program the same way.
For example, retail investors may choose to follow the board on all matters, or all except contested director elections and shareholder-approved mergers, acquisitions, or divestitures. The rules as to which relief is granted are Exchange Act Rules 14a-3(a) ("Information to be furnished to security holders"), 14a-4(d)(2), (d)(3) and (f) ("Requirements as to proxy"), 14a-6(o) ("Filing requirements"), 14a-10 ("Prohibition of certain solicitations"), and 14a-12(a) ("Solicitation before furnishing a proxy statement").
Tesla argued that in the absence of such a program to facilitate retail voting, retail investors found it difficult to vote at all. Broadridge Financial Solutions data showed they voted 28 percent of their shares in 2025, against 76.6 percent for institutions.
The Division relied on the issuer's representations that: (i) all shareholders will continue to receive proxy materials; (ii) participants can override a standing instruction on any proposal, or opt out, at no cost; (iii) participants receive at least annual reminders of their participation in the program; and (iv) the issuer discloses the program on its website and in proxy statements.
The program charges no fee and covers only votes at duly called meetings, not written consents. Program communications are filed under Schedule 14A.
The Division said different facts may change the result. It expressed no legal conclusion and no view on other proxy provisions, the Investment Company Act ("ICA"), or the Advisers Act.
A day before the September 29, 2026, letter to Tesla, the same Office granted Goldman Sachs relief for a "Voting Instruction Program" built on the same basic design. The relief covered five of Tesla's seven rules, leaving out 14a-6(o) and 14a-10, and it was limited to Goldman. Goldman's program also reaches current partners and employees, who could enroll through an internal company system, as well as former partners and employees, according to Goldman's request letter. Because current employees could enroll, the staff relied on extra representations: enrolling is not a condition of employment, has no effect on pay or promotion, and will be protected against misuse.
The Office's letter to Exxon Mobil, issued about a year before the others in September 2025, created the model Tesla built on: a standing instruction to vote with the board, the same two voting choices, annual reminders, and opt-outs or overrides at no cost. The relief was narrower, though. It covered only Rules 14a-4(d)(2) and (d)(3), which bar a proxy from covering more than one meeting or extending beyond the next annual meeting. It applied only to Exxon Mobil and relied on the program being closed to investment advisers voting for clients. Tesla described its own request as addressing market developments since then and serving as a framework for other issuers.
On the same day as the Tesla letter, the SEC Division of Investment Management granted relief under all seven of the Tesla rules to any registered fund or business development company that runs the Mutual Fund Directors Forum's "Directed Voting Program." In its request letter, the association described its program as similar in all relevant respects to Tesla's, but the program adds the following fund-specific safeguards: (i) votes follow only recommendations approved by the board, including all of the independent directors; (ii) the independent directors must approve the program unanimously before launch, and the board must reapprove it at least every three years; and (iii) contested director elections and changes to the fund's agreement with its primary investment adviser are always excluded. Participants may also choose to exclude fund mergers, as well as fee-raising changes to 12b-1 plans under ICA Rule 12b-1 ("Distribution of shares by registered open-end management investment company"). The stated goal was cutting the cost of fund proxy campaigns rather than giving retail investors better voting tools.