SEC Issues Broad Relief for Retail Voting Programs Under Tesla No-Action Letter

Summary

This morning, in response to a request from Tesla, Inc., the Staff of the SEC’s Division of Corporation Finance issued a letter (the “Framework Letter”) to serve as a framework for the development of voluntary retail voting programs (“IVRVPs”) by issuers. S&C represented Tesla in obtaining relief under the Framework Letter, which reflects months of discussions between the SEC staff, Tesla and S&C.

Retail investors face significant and disproportionate challenges in voting their public company shares. IVRVPs are intended to offer retail investors practical means to exercise their voting rights by empowering them to provide a standing instruction to vote their shares in alignment with board recommendations. Although the Framework Letter addresses some of the same legal considerations as the SEC staff’s 2025 no-action letter regarding ExxonMobil’s retail voting program, Tesla sought additional clarity regarding the application of the Federal proxy rules to IVRVPs to facilitate the evolution and broader issuer adoption of IVRVPs. In addition, the Framework Letter addresses market and technological developments since 2025, including those resulting from Tesla’s work with providers of shareholder communication services to establish a user-friendly option for retail investors to opt into the IVRVPs of all issuers that offer such programs (“Hubs”). In response to a request by Tesla, the Staff confirmed that other issuers may rely on the relief in operating an IVRVP in the manner described in Tesla’s Letter.

Key Features of IVRVPs Covered by Framework Letter

• Eligible shareholders. The Framework Letter permits an issuer to offer IVRVP enrollment to all retail shareholders or to only a subset of retail shareholders.[1] In addition, an issuer could offer IVRVP enrollment to investment advisers registered under the Investment Advisers Act of 1940 that are exercising voting authority with respect to client securities without obtaining separate no-action relief.
• Federal proxy rules. Whereas the SEC staff’s 2025 letter provided no-action relief under Exchange Act Rules 14a‑4(d)(2) and (3), the relief under the Framework Letter extends the coverage to Rules 14a‑3(a), 14a‑4(d)(2), (3), 14a‑4(f), 14a‑6(o), 14a‑10 and 14a‑12(a). As discussed in Tesla’s letter, the SEC staff also did not object to Tesla’s view that Rules 14a-4(a), (b), (f), 14a-4(d)(1), (4), 14a-5 and 14a-6 (aside from 14a-6(o)) are inapplicable in this context.
• Standing instructions. Eligible shareholders will be able to choose between two options for standing instructions: to vote shares in line with board recommendations on (1) all matters or (2) all matters except contested director elections or any acquisition, merger or divestiture transaction that, under applicable state law or stock exchange rules, requires approval of the company’s shareholders (a “special matter”).
• Enrollment timing. Eligible shareholders will be able to enroll at any time and at no cost. In addition to sending emails or mail offering eligible shareholders the opportunity to enroll, an issuer could set up the voting platform for a shareholder meeting (e.g., on the ProxyVote screen) to include or reference the opportunity for eligible shareholders to elect to participate in its IVRVP. In each case, any eligible shareholder who enrolls will have their shares voted under the applicable standing instruction beginning with the next meeting for which proxy materials have not yet been filed.
• Enrollment options. In addition to the ability to enroll for each account in which shares are held, the Framework Letter would cover IVRVPs that allow eligible shareholders to enroll on a “householding” basis (i.e., across all accounts held in the shareholder’s name). In addition, an issuer could give eligible shareholders the option to enroll once and have that enrollment preserved through temporary exits from the issuer’s stock.
• Hubs. Issuers can participate in Hubs that allow eligible shareholders to easily enroll in all available IVRVPs at the same time.
• Proxy materials. Enrolled shareholders will still receive proxy materials for every shareholder meeting and can use the proxy card they receive for each meeting to override the standing instruction for specific matters at specific meetings.
• Opt-Out. Enrolled shareholders can revoke their standing instructions by opting out at any time and at no cost beginning with the next meeting for which proxy materials have not been filed.
• Reminders. Enrolled shareholders will receive reminders that they are enrolled in the IVRVP at least annually. These reminders will inform shareholders of the standing instruction they selected, and of their ability to opt out or override the standing instruction. Shareholders who have opted into the IVRVP also will receive a reminder prior to any meeting that involves a special matter.
• Availability of relief to other issuers. The Framework Letter expressly states that any issuer operating an IVRVP in a manner consistent with Tesla’s letter may rely on the Framework Letter without obtaining separate no-action relief.

Implications

Data[2] have repeatedly shown that, without a user-friendly way to vote, the proxy voting system disproportionately affects the vote and voice of retail investors. By giving retail investors access to a no-fee, client-directed process similar to those currently available to institutional investors, IVRVPs will reduce the time and other burdens borne by retail investors in the voting process, facilitating greater participation in the corporate governance process by ultimate asset owners.

The Framework Letter provides important clarifications to issuers that will better position them to adopt IVRVPs, including by strengthening issuers’ litigation posture if they adopt IVRVPs that operate in a manner consistent with the Framework Letter. The Framework Letter also highlights the key features of IVRVPs that are designed to provide participating shareholders with the investor protections contemplated by the Federal proxy rules.

Issuers interested in establishing IVRVPs should carefully review Tesla’s letter and the Framework Letter. The SEC staff’s clearly stated permission for issuers to rely on the Framework Letter will allow issuers to leverage Tesla’s letter when setting up similar programs. If you have any questions regarding the matters covered in this publication, please reach out to the S&C team.