Investor Arbitration Talk ‘Worthwhile’ But No Priority: Clayton

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By Andrew Ramonas

Prohibiting shareholder lawsuits against companies is “worthwhile to discuss” but isn’t a short-term priority for the SEC, Chairman Jay Clayton said March 8.

Clayton, an independent appointed by President Donald Trump, said he doesn’t have a “definitive view” on whether the Securities and Exchange Commission should alter its longstanding policy against allowing mandatory arbitration clauses in initial public offerings. The chairman’s remarks at an SEC Investor Advisory Committee meeting are his latest effort to rein in recent talk that the commission may act soon on the matter.

“This is a complex issue that invokes divergent and deeply held perspectives and could inevitably exhaust a disproportionate share of the commission’s resources,” Clayton said. “I believe there are other matters to which we should devote our attention at this time.”

The SEC still might develop a regulation in the space at some point, however.

“I’m not ruling out a rulemaking,” Clayton told reporters.

‘Not Anxious’

His most recent comments came after Democratic SEC Commissioner Robert Jackson and agency Investor Advocate Rick Fleming used speeches in February to share their misgivings about the possibility of forced arbitration supported by the commission. Jackson likened such clauses to the “handcuffing” of investors, while Fleming said their inclusion would be “draconian.”

Clayton, who has sought to encourage IPOs as chairman, has said repeatedly he’s “not anxious” to consider a policy change on shareholders’ class-action lawsuits, which can force companies to pay large sums of money to resolve allegations of wrongdoing. Instead, the chairman said the SEC has more pressing work related to initial coin offerings, the regulation of exchanged-traded funds, and other matters.

“I strongly believe that Main Street investors as a group and those who focus on the performance of our markets and economy more broadly would generally agree with this prioritization,” Clayton said.

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To contact the editor responsible for this story: Seth Stern at

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