On July 9, 2026, the SEC’s Division of Corporation Finance released three crucial new Corporation Finance Interpretation (CFI), clarifying participant status in proxy solicitations. This positive development represents a major victory for public companies, shielding them from expensive, disruptive board battles funded by anonymous activist syndicates. The updated CFI is perfectly aligned with the agency’s “minimum effective dose” strategy championed by Chairman Paul Atkins to revitalize our capital markets and remove unnecessary regulatory friction (see my previous blog HERE).
Under this business-first paradigm, the federal framework is designed to support corporate stability, allowing management to focus precious resources on growth rather than costly defensive maneuvers. While the largest enterprises can absorb the multi-million dollar costs of proxy contests, smaller issuers frequently face severe intimidation fromcactivists who prioritize political or social goals over financial health. By forcing these funding sources out of the shadows, the regulatory update has provided a powerful shield for corporate America.
CFI Question 155.02
The new CFI, Question 155.02, tackles a common tactical loophole used by activist syndicates. Historically, activist groups have often established limited partnerships (LPs) or co-investment pools to accumulate shares of a target corporation without disclosing the identities of the underlying financial backers. By hiding behind these shell entities, wealthy investors could quietly bankroll proxy fights while avoiding the public reporting mandates of Schedule 14A.
To address this practice, the SEC answered a key technical question:
Question: An entity (e.g., a limited partnership) is formed for the purpose of raising funds to acquire securities of a specific registrant and engage in a proxy solicitation to change the composition of the registrant’s board of directors at the registrant’s upcoming shareholder meeting. Prospective investors in the entity are informed in advance of the specific purpose for which their funds will be used, including the identity of the targeted registrant and the purpose of the planned proxy solicitation. Do the investors in the entity fall within the definition of “participants” under Instruction 3(a)(iv) to Item 4 of Schedule 14A (a “person who finances or joins with another to finance the solicitation of proxies, except persons who contribute not more than $500 and who are not otherwise participants”) for the planned solicitation?
Answer: Yes, with respect to each investor that invested more than $500 in the entity.
Under the federal proxy rules, a “participant” in a solicitation is defined to include any person who finances or joins with another to finance the effort, excluding those who contribute $500 or less. The SEC has now shut down this structural arbitrage. The newly issued guidance confirms that when an entity is formed to raise funds for the explicit purpose of waging a proxy contest against a pre-identified registrant, every backing investor contributing over $500 falls squarely within the definition of a participant.
Consequently, these investors must be identified as participants in the proxy materials. Their share ownership, transaction histories, and potential conflicts of interest will be laid bare in public filings. This transparency serves as a critical defense for public boards and management teams.
CFI 110.09: Unmasking the Financial Backers of Activist SPVs
CFI Question 110.09, aligns the new Schedule 14A guidance with Schedule 13D requirements. When activist groups establish limited partnerships (LPs) or co-investment pools they typically described their purchase funding generically as “working capital of the partnership,” when filing Schedule 13D, effectively keeping primary investors anonymous.
The Division has now dismantled this practice by focusing on investor intent and target pre-identification:
Question: An entity (e.g., a limited partnership) is formed for the purpose of raising funds to acquire securities of a specific issuer and engage in an activism campaign at such issuer. Prospective investors in the entity are informed in advance of the specific purpose for which their funds will be used, including the identity of the targeted issuer. If the entity is required to report beneficial ownership of the issuer’s securities on a Schedule 13D, would the identities of the investors in the entity have to be disclosed in the Schedule 13D?
Answer: Yes. Item 3 of Schedule 13D states that if any part of the purchase price is represented by funds “obtained for the purpose of acquiring, holding, trading or voting the securities, a description of the transaction” by which the funds were obtained and the names of the parties to such transaction must be disclosed in the Schedule 13D filing. Accordingly, the identities of the investors in an entity formed for the purpose of acquiring securities of a specific issuer and engaging in an activism campaign at that issuer must be disclosed. [July 9, 2026]
By linking disclosure directly to advance knowledge, the Staff leverages the literal text of Item 3. If limited partners invest in a pool knowing exactly which stock will be purchased and targeted, they are financing a specific, pre-identified acquisition. Consequently, their individual identities must be disclosed as funding sources in the resulting Schedule 13D filing.
CFI 110.10: Instruction C Disclosures Are Cumulative, Not Alternative
The companion update, CFI Question 110.10, addresses another recurring technical dispute regarding partnership disclosure. Under Instruction C to Schedule 13D, if the reporting person is a partnership, corporation, or other group, information must be provided for various affiliated entities and control individuals. In some filings, activist entities argued that Instruction C acted to limit or replace the necessary disclosure under Items 2-6, restricting the unmasking requirement only to those individuals specifically named under its provisions.
The SEC flatly rejected this argument, clarifying that Instruction C’s requirements are cumulative:
Question: When a Schedule 13D reporting person is a general or limited partnership and not a natural person, does Instruction C to Schedule 13D operate to limit the information required to be disclosed in response to Items 2-6 of Schedule 13D to information about the persons or entities set forth in Instruction C?
Answer: No. Instruction C to Schedule 13D lists the persons and entities in addition to the reporting person as to which the information required by Items 2-6 must be provided when the reporting person is not a natural person. It is not intended to limit or substitute the information required by Items 2-6 as to the reporting person itself. See CNW Corp. v. Japonica Partners, L.P., 874 F.2d 193, 200 (3d Cir. 1989) (finding that Instruction C to Schedule 13D “stipulate[s] the entities and persons, in addition to the filer, with respect to whom the information required by each item must be supplied when the filer is not a natural person.”)
The implications of this clarification are sweeping. If a limited partnership files a Schedule 13D, Items 2-6 disclosures must be provided for the partnership itself, each general partner (GP), any entity performing GP functions, and each controlling person. If any GP or control entity is a corporation, the mandate expands to include every executive officer, director, and ultimate parent company.
This multi-layered unmasking prevents activist groups from using complex, nested shell companies to obscure the identities of the true decision-makers. Public company boards are frequently subjected to proxy campaigns where the ultimate instigators remain hidden behind three or four tiers of partnerships and corporate parents. By reinforcing the cumulative nature of Instruction C, the Staff has ensured that issuers can trace the entire control chain of any hostile challenger.
The Impact of Activism on Smaller Public Companies
Proxy contests are notoriously expensive endeavors. When activist campaigns emerge, target boards must deploy substantial financial capital to defend their strategic vision. For a public company, this means diverting cash away from critical corporate priorities such as research, development, and capital expansion. While mega-cap corporations possess the massive resources to withstand these high costs, the vast majority of smaller public issuers do not.
Consequently, smaller public companies are highly susceptible to intimidation. Activist groups can weaponize the threat of a costly board battle to force concessions, even when their primary motivations are political or social. These special-interest campaigns often demonstrate very little regard for the long-term economic stability or financial viability of the target company. By requiring full transparency from the backers of these campaigns, the SEC has taken a step towards limiting the ability of activists to wage asymmetric, anonymous wars against smaller issuers.
Relationship Partner Advisory: Leveraging the CFI as a Strategic Shield
For years, activist campaigns have operated with an unfair information advantage, leveraging structured capital to intimidate boards. By utilizing the newly issued CFI, issuers can now demand complete transparency regarding the financiers of any pre-identified activist campaign.
To leverage this positive regulatory change effectively, public company executives and boards should consider three immediate actions. First, review your advance notice bylaws to ensure they require detailed disclosures regarding any nominating shareholder’s funding sources and affiliates. Second, should an activist partnership surface, work with counsel to demand full, immediate compliance with the disclosure requirements of Item 4 of Schedule 14A and Schedule 13D. Unmasking the primary financial backers often serves as an excellent deterrent. Many passive limited partners or high-net-worth individuals simply do not wish to have their identities, other holdings, or historical transaction records made public. Finally, proactive preparation remains your best defense. Aligning your investor relations and legal teams early prevents the friction of sudden, unexpected activist campaigns.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firms reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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