SEC Changes Course On Mandatory Issuer-Investor Arbitration Clauses

On September 17, 2025, the U.S. Securities and Exchange Commission (SEC) issued a policy statement potentially paving the way for the adoption of mandatory arbitration by issuers. According to the policy statement, "the presence of an issuer-investor mandatory arbitration provision will not . . . impact decisions whether to accelerate the effectiveness of a registration statement." This development may have significant implications for public companies, investors, and the securities litigation landscape.

Background

Historically, the SEC has been unwilling to accelerate the effectiveness of registration statements of companies with issuer-investor mandatory arbitration clauses in their organizational documents, citing concerns about the protection of investor rights and the potential for such clauses to limit access to the courts.