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The US Securities and Exchange Commission (SEC) has amended its quorum requirements, allowing rulemaking when only one or two commissioners remain in office. The change took effect as the agency shrank to two serving commissioners, both Republicans, and as it considers proposals that could significantly reshape US shareholder rights and corporate governance.
While the amendment appears procedural, its importance lies in what it enables. By permanently lowering the threshold for Commission business during vacancies, the SEC can advance far-reaching reforms with its smallest leadership team in decades. As it reconsiders key elements of the shareholder proposal framework, the move has intensified debate over oversight, regulatory legitimacy and the durability of future rulemaking.
The SEC says the amendment will help "promote flexibility and finality of agency rulemaking". Under the new approach, if only one or two commissioners are in office, that number is sufficient to constitute a quorum. The amendment also allows a single commissioner to constitute a quorum for a particular matter when all other sitting commissioners are disqualified from participating.
While the SEC has previously been able to operate with only one or two commissioners in office during periods of vacancy, it had never before expressly allowed a lone commissioner to act as a quorum in a matter where other commissioners remained in office but were recused or disqualified. Previously, three commissioners were generally required, with limited exceptions.
The amendment was issued on 30 September and took effect on 2 October, with Hester Peirce departing from the Commission on 1 October, leaving SEC Chair Paul Atkins and Mark Uyeda as the only commissioners. Both broadly support the Trump administration's deregulatory agenda. The revised rules let them continue rulemaking despite the Commission traditionally having five members.
The change also makes future vacancies or recusals less likely to halt Commission activity. Supporters say this provides continuity and administrative certainty. Critics contend that major decisions made by a Commission with limited membership could face greater scrutiny and be more vulnerable to challenge or reversal.
The significance of the amendment is heightened by the issues currently before the SEC.
The agency has proposed rescinding Rule 14a-8, the foundation of the long-established US shareholder proposal process, which lets investors put certain governance and sustainability issues before fellow shareholders. It is also considering amendments to Rule 14a-4 and removing Rule 14a-6. Together, the proposals could reshape shareholder engagement with public companies and how governance concerns reach annual meetings. The comment period for the proposal is open until mid-November.
Those consultations follow the SEC's August decision to stop responding permanently to Rule 14a-8 "no action" requests. For decades, the process let companies and investors seek regulatory guidance on disputed proposals. Its removal is expected to increase reliance on litigation and private dispute resolution.
Together, these developments signal significant change in US shareholder rights. The quorum amendment does not alter those rights, but removes one potential constraint on the Commission's ability to pursue reforms while vacancies remain unfilled.
The amendment also arrives as the SEC pursues policies intended to encourage greater IPO activity under the "Make IPOs Great Again" initiative championed by Chair Atkins. The quorum change means Atkins and the SEC could more easily pursue changes to promote IPOs in an approach which favours companies and disenfranchises shareholders.
More public listings could expand investment opportunities, but Minerva Analytics and other governance experts have highlighted the prevalence of dual-class share structures among IPO candidates. These can concentrate voting power with founders or insiders and limit minority shareholders' influence. Atkins has also urged states competing for corporate incorporations to ensure their laws "do not enable the politicization of shareholder meetings", comments some governance specialists see as signalling a broader shift in regulatory priorities.
For critics, the quorum change is therefore significant not because it alters any single policy, but because it could accelerate decision-making across a range of governance issues at a time when fewer perspectives are represented within the Commission.
"Rules that reverse decades of settled policy are exactly where deliberation matters most," warned corporate governance expert James McRitchie. "A major rule adopted by one Commissioner, or by members of one party alone, may also be more vulnerable to challenge and to reversal by a future Commission. That undercuts the very 'finality' the SEC says it wants."
McRitchie has filed a petition for rulemaking under Rule 192 of the SEC's Rules of Practice, asking the Commission to rescind the amendment or, alternatively, suspend it and submit it for public comment.
His petition also calls on the SEC to postpone final decisions on major rulemakings, including the proposed rescission of Rule 14a-8, until the Commission has at least three members, including at least one commissioner from outside the majority party.
The request reflects wider concerns about the agency's composition. At the start of 2025, the SEC was evenly divided between Republican and Democratic commissioners. Since Jaime Lizárraga and Caroline Crenshaw departed, it has consisted solely of Republicans. In June, 11 Democratic senators, including Senate Banking Committee ranking member Elizabeth Warren, urged the White House to fill the vacancies.
Historical precedent exists. In 1995, the SEC adopted a "Rule of Two" to operate when fewer than three seats are filled, which technically remains in effect. The SEC operated with two commissioners for a period of six months in 1995 before the Commission returned to near-full membership. However, current circumstances suggest that the quorum of just two Commissioners will last longer than it did in the mid-1990s.
For investors, stewardship teams and issuers, the key question is not the quorum amendment itself but how it affects the SEC's capacity to act over the coming months. The most important indicators will be the fate of Rule 14a-8, any changes to proxy-voting and shareholder-engagement rules, and whether vacancies on the Commission remain unfilled as those decisions are taken.
The amendment's immediate impact may be procedural, but its longer-term significance will be measured by the reforms that follow. As the SEC considers consequential changes to shareholder proposal and governance rules, investors will increasingly focus on whether policies adopted by a historically understaffed Commission can withstand future legal, political and regulatory scrutiny.
