SEC Chairman Raises Possibility of Eliminating Rule 14a-8 Shareholder Proposals for Delaware Companies

In remarks delivered on October 9, 2025, at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala, SEC Chairman Paul Atkins suggested that the SEC may be open to eliminating the ability of shareholders to submit precatory shareholder proposals to companies incorporated in Delaware. Chairman Atkins referred to a forthcoming publication in the Michigan Business & Entrepreneurial Law Review concluding that such proposals are not a “proper subject” because Delaware law does not confer on stockholders an inherent right to vote on them. According to Chairman Atkins, these proposals should be excludable under Exchange Act Rule 14a-8(i)(1). He stated that if a company submitted a no-action letter with a Delaware legal opinion indicating that the proposal is “‘not a proper subject’ for shareholder action under Delaware law... I have high confidence that the SEC staff will honor this position.”

The Delaware courts have not directly addressed whether precatory proposals are a “proper subject.” However, if a Delaware company were to submit a no-action request and receive support from the Delaware courts, such a ruling could effectively eliminate a large percentage of shareholder proposals as they currently exist.

For more information, see Debevoise Governance Round-Up.

CARB Publishes Draft SB 253 Reporting Template

On October 10, 2025, the California Air Resources Board (“CARB”) published a draft template for Scopes 1 and 2 greenhouse gas emissions reporting under the Climate Corporate Data Accountability Act (“SB 253”). SB 253 was enacted in October 2023 and requires companies with more than $1 billion in revenue that do business in California to report Scopes 1 and 2 emissions beginning in 2026 for the 2025 fiscal year and Scope 3 emissions beginning in 2027 for the 2026 fiscal year. The draft template is separated into sections covering (1) organization information, (2) third-party verification, (3) inventory boundary, (4) Scope 1 and Scope 2 disclosure, (5) methodology, (6) de minimis or minor sources, (7) potential reporting obligations under the California Mandatory Reporting Regulation and (8) emissions reductions. CARB clarified that use of the template is voluntary for the 2026 reporting cycle and intended to streamline reporting without modifying statutory requirements.

CARB requested stakeholder feedback by October 27, 2025, particularly on the proposed categorization of Scopes 1 and 2 disclosures by emissions source rather than by greenhouse gas and on whether to require a single approach to defining organizational boundaries and the fields relating to emissions reduction initiatives. CARB is expected to issue updated guidance based on stakeholder input in the coming months.

For more information, see Debevoise Debrief. For more on California’s Climate Disclosure Laws, see Debevoise Update and Debevoise Debrief on the August CARB workshop.

Glass Lewis to End Single Voting Recommendations, Offer Multiple Perspectives

Glass Lewis announced that it will stop issuing single voting recommendations on proxy matters and will instead provide multiple perspectives to clients beginning in 2027. The change follows criticism from policymakers over the firm’s diversity and environmental criteria. Under the new model, Glass Lewis will offer recommendations aligned with management, governance, activism or sustainability priorities. The firm stated that a single perspective is no longer sufficient and that transitioning to a fully client-driven policy model will place greater control in the hands of shareholders, empowering them to vote in accordance with their specific beliefs and priorities.

The move mirrors a recent shift by Institutional Shareholder Services, which introduced governance research services without voting recommendations, offering customizable data and analysis to clients. Glass Lewis cited the growing divergence between U.S. and European institutional investors regarding fiduciary duty and sustainability as a key factor, noting that European clients already rely more on thematic policies rather than benchmark views.

Third Circuit Rules Corporate Harm Alone Is Insufficient to Sustain Securities Fraud Claim

In Handal v. Innovative Industrial Properties Inc. (3d Cir. Oct. 15, 2025), the Third Circuit affirmed the dismissal of a putative securities fraud class action against Innovative Industrial Properties Inc., a real estate investment trust that leases properties to cannabis companies, holding that the alleged conduct could not support a claim under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The company was defrauded by tenant Kings Garden, which submitted fraudulent reimbursement requests for capital improvements totaling more than $48 million. After the fraud was discovered and disclosed, shareholders alleged that the company and its executives made false or misleading statements about their due diligence, tenant monitoring and reimbursements, including securities filings stating that the company “relies on its management team to perform due diligence” and that acquisitions are “typically” conditioned on “satisfactory completion of due diligence”; descriptions of ongoing monitoring such as reviewing publicly filed information and, “in some instances,” conducting site visits; and a press release asserting that any reimbursements “relate only to verified, qualified improvements” and “never” function as loans. These statements, plaintiffs argued, were misleading in light of the undisclosed fraud, causing losses when the fraud became public.

The court held that corporate harm and negligence alone do not amount to securities fraud and that federal anti-fraud laws do not guarantee shareholder protection. Most challenged statements were non-actionable opinions, not false or misleading or not sufficiently specific. For the one statement plausibly alleged to be false, the facts did not support a strong inference of scienter as required by the Private Securities Litigation Reform Act. The court also rejected the application of corporate scienter and found no basis for control-person liability under Section 20(a).

Agentic AI in Retail Investing: Navigating Regulatory and Operational Risk

Generative artificial intelligence (“GenAI”) innovations are rapidly transforming the formulation, analysis and delivery of investment advice. Many broker-dealers and investment advisers are embracing GenAI to support parts of the investment life cycle, including research, risk modeling and market surveillance. One new focus is agentic AI: the use of AI to complete more than one task, either in series or in parallel, without human involvement. Handing over investment decision-making to agentic AI tools without meaningful human oversight creates significant regulatory and compliance risk. The SEC and FINRA have stated that a registrant’s regulatory obligations remain unchanged when leveraging GenAI to generate retail investment recommendations and advice, and the existing framework squarely applies to agentic AI.

Broker-dealers and investment advisers using GenAI must continue to satisfy obligations under Regulation Best Interest, FINRA rules and the fiduciary duties of care and loyalty under the Investment Advisers Act of 1940. There is no “GenAI made me do it” defense under the federal securities laws or FINRA rules; firms and their human investment professionals remain responsible for all recommendations and their consequences. Firms should ensure that GenAI tools are explainable and capable of identifying the information relied upon for investment selections, that outputs are reviewed and verified by human professionals and that recommendations are documented and demonstrably in the best interest of clients.

As firms continue to incorporate AI into investment selection, they should consider safeguards such as clear policies governing GenAI use, pre-approval of AI tools, training for financial professionals, human review and approval, accurate disclosures about GenAI’s role in the investment process and monitoring of GenAI-influenced activity. GenAI tools are rapidly proliferating across the investment landscape but pose particularly acute regulatory and compliance risks for retail-focused firms. Compliance officers and in-house counsel should stay ahead of this trend by updating policies and implementing strong oversight, documentation and risk controls.

For more information, see Debevoise in Depth.

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Markets At a Glance

The below market snapshot shows the volume of U.S. IPOs, follow-on offerings, investment grade corporate debt issuances, convertible bonds issuances and high-yield corporate debt issuances from the third quarter of 2024 through the third quarter of 2025.

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.