The Challenge
Large institutional investors have long struggled to balance their stewardship responsibilities with maintaining Schedule 13G eligibility. Under Sections 13(d) and 13(g) of the Securities Exchange Act, beneficial owners of more than five percent of an issuer's equity securities must file either Schedule 13D or the less burdensome Schedule 13G. The key difference hinges on intent. Schedule 13G is available only to investors who don't hold securities "with the purpose or effect of changing or influencing the control of the issuer."
This language created uncertainty. If your organization is a pension fund or asset manager filing on 13G, can you discuss board composition with an issuer? Can you explain your voting rationale after an Annual General Meeting? Can you speak with a dissident investor during a proxy contest without triggering a conversion to 13D?
The SEC's February 2025 CFIs broadly discouraged such engagement, reducing visibility into shareholder views for both issuers and activists. Investment managers with fiduciary duties to their own investors found themselves caught between regulatory caution and stewardship obligations. The practical effect was silence, even when dialogue could have improved governance outcomes.
The Environment and Constraints
This issue wasn't theoretical. Under Rule 13d-1(b) and Rule 13d-1(c), qualified institutional investors and certain passive investors can use Schedule 13G, which requires less frequent filing and reduced disclosure. Losing 13G eligibility means converting to Schedule 13D within ten days, publicly disclosing your intentions, and accepting the label of activist investor, even if your engagement was modest.
The stakes are high. Schedule 13D filers face immediate market scrutiny, potential litigation risk, and reputational consequences. For large index funds and pension systems, the administrative burden alone is significant. More importantly, the threat of reclassification discouraged the kind of private, constructive engagement that often prevents public disputes.
Investment managers also operate under the Investor Stewardship Code and similar frameworks that expect them to monitor investee companies and engage on material issues. The February 2025 guidance created a direct conflict: engage and risk regulatory violation, or stay silent and breach Stewardship Responsibilities.
Issuers faced their own constraints. Boards seeking to understand shareholder perspectives before making governance decisions couldn't reach out to their largest holders without potentially triggering 13D conversion for those investors. This informational void made it harder to assess support for proposals, understand voting patterns, or address concerns before they escalated.
The Approach Taken
On September 2, 2026, the SEC issued three new CFIs that directly addressed these friction points. The guidance doesn't change the underlying statute but clarifies how the SEC staff interprets "influencing control" in specific engagement contexts.
Question 103.13 addresses issuer-initiated engagement. The CFI establishes that discussions initiated by the issuer itself, or responses to issuer requests to understand past voting decisions, are "less likely to be viewed as an attempt by the shareholder to 'influence' control." Critically, it also permits shareholders to initiate contact "solely to better understand the issuer's disclosures or other public communications."
Question 103.14 tackles proxy contests directly. It confirms that discussing your views on a particular topic and how those views could inform your voting decisions with a person engaged in a proxy solicitation doesn't, by itself, disqualify you from 13G status.
Question 103.15 covers clarification requests. Shareholders can contact issuers to seek clarification about facts or statements in filings, including Proxy Statements, without losing 13G eligibility.
Each CFI includes the qualifier "by itself," signaling that these activities alone won't trigger reclassification, though the determination remains fact-specific. The guidance doesn't create safe harbors but provides meaningful interpretive comfort.
Results and Metrics
The immediate effect was to restore dialogue channels that had been effectively closed since February 2025. The guidance explicitly states it "supplements earlier CFIs from February 2025 that broadly chilled engagement of both dissident investors and issuers with significant passive shareholders, thereby decreasing investor and issuer visibility into their views."
The new CFIs benefit three constituencies simultaneously. For 13G filers, they clarify that routine stewardship activities, including engagement during proxy contests, don't automatically trigger activist classification. For issuers, they enable boards to solicit feedback from major shareholders without creating regulatory risk for those investors. For dissident investors, they expand the potential coalition of informed voters who can discuss contest issues without fear of reclassification.
The governance ecosystem functions better when information flows. These CFIs don't authorize shareholders to demand board seats or threaten withhold campaigns while maintaining 13G status, but they do permit the kind of substantive dialogue that often prevents disputes from becoming contests in the first place.
What Could Be Done Differently
The CFIs remain principles-based rather than rule-based, which preserves flexibility but doesn't eliminate uncertainty. The repeated phrase "by itself" and the caveat that "the determination is based on all the relevant facts and circumstances" mean investors must still assess cumulative conduct.
A more prescriptive approach might have specified the number of meetings, the topics that remain permissible, or the point at which engagement crosses into influence. The SEC chose not to draw those bright lines, likely because doing so would create new opportunities for gamesmanship and couldn't capture the full range of engagement scenarios.
The guidance also doesn't address certain edge cases. Can you discuss multiple topics in a single meeting? Can you suggest potential director candidates if the issuer asks? Can you coordinate your questions with other 13G filers? These scenarios will require additional fact-specific analysis.
Takeaways for Your Team
If you file Schedule 13G, document your engagement carefully. When an issuer initiates contact, note that fact. When you're seeking clarification on public disclosures, frame your inquiry that way explicitly. When discussing voting decisions with dissident investors, focus on how your views inform your vote, not on coordinating voting strategy.
Review your stewardship policies to incorporate this guidance. You can now engage more confidently with issuers on governance matters without automatic 13D risk, but you still need guardrails. Define what topics your team can discuss, who can initiate contact, and how to document the purpose of each engagement.
For issuers, this guidance enables more proactive shareholder outreach. You can now contact significant 13G holders to understand their voting rationale or explain upcoming proposals without creating regulatory problems for them. Build these conversations into your governance calendar, particularly before contentious votes.
If you're advising boards during proxy contests, recognize that major passive shareholders can now discuss contest issues with dissidents without automatic reclassification. This doesn't mean they'll support the dissident, but it does mean they'll be better informed. Adjust your communication strategy accordingly.
The September 2, 2026 CFIs don't eliminate all ambiguity, but they restore a functional middle ground between silence and activism. Use that space wisely.
