On September 17, 2025, the U.S. Securities and Exchange Commission (SEC or Commission) issued a policy statement clarifying that its decision whether to accelerate the effectiveness of a registration statement for a securities offering will not be affected by the presence of a provision requiring arbitration of investor claims arising under federal securities laws.1 In the past, the Commission had declined to accelerate registration statements that contained mandatory arbitration provisions. The Commission indicated that, going forward, it will focus on evaluating the adequacy of registration statement disclosures, including issuer-investor mandatory arbitration provisions. The Commission also amended Rule 431 of its Rules of Practice to provide that any challenge to such an acceleration decision, which the Commission delegates to staff, will not automatically stay the acceleration decision.
The Commission cautions that this policy statement does not reflect any view of the SEC on the merits of mandatory arbitration provisions. According to SEC Chairman Paul Atkins, the Commission issued this statement merely to provide "clarity that mandatory arbitration provisions are not inconsistent with federal securities laws."2
The SEC evaluates registration acceleration requests under the standards provided in Section 8(a) and Rule 461 of the Securities Act of 1933, which require complete and adequate disclosure of material information3 and consideration of "the public interest and the protection of investors."4 The SEC historically treated mandatory arbitration provisions as inconsistent with the public interest because they preclude potential claimants from bringing judicial actions to vindicate their rights. In the past, the SEC's Division of Corporation Finance viewed mandatory arbitration provisions as inconsistent with federal securities laws due to their anti-waiver provisions,5 which void conditions or provisions that require investors to waive compliance with securities laws.6
The policy statement refers to recent Supreme Court precedent that has clarified that mandatory arbitration provisions do not require investors to waive substantive rights under the federal securities laws and therefore are not necessarily inconsistent with those laws.7 The policy statement also cites Supreme Court precedent that a contractual arbitration requirement would not violate federal antitrust laws because these laws "do not guarantee an affordable procedural path to the vindication of every claim."8
Going forward, issuers will need to consider whether crafting charter or bylaw provisions for mandatory arbitration of investor claims is in their best interest and, if so, the specifics of such provisions and the arbitral rules that should apply. Arbitration may have many benefits depending on the procedural framework that is adopted, including confidentiality, the ability to reduce class action litigation risk and more limited discovery than in federal court proceedings, potentially resulting in significant cost and time savings. It may also have disadvantages. For example, issuers would forgo the benefits of the Private Securities Litigation Reform Act, which requires heightened and detailed pleadings and provides for an automatic stay of discovery pending decision on any motion to dismiss. In certain instances involving arbitration provisions that preclude class actions, plaintiffs' attorneys have responded with mass arbitration tactics — whereby they have filed hundreds or more of individual arbitrations — that can force companies to incur costs to defend against claims they may not consider meritorious.
There are still other open questions — including whether courts, investors and proxy advisers will find the Commission's analysis persuasive — and litigation on these issues may occur. The policy statement also expressly does not address several questions arising under the Federal Arbitration Act (FAA) that the SEC considered were outside its purview, e.g., it does not address whether any particular mandatory arbitration provision will qualify as a binding arbitration agreement for purposes of the FAA, which may be the subject of dispute. It also acknowledges that "potential uncertainty exists regarding the intersection of the FAA and state law."9 For example, Delaware recently added Section 115(c) to its General Corporation Law, allowing corporations to require stockholders to bring non-internal claims in a prescribed forum or venue as long as at least one Delaware court has jurisdiction over such claims, effectively precluding mandatory arbitration.10 Further, the Commission noted that it is not in a position to opine on whether the FAA preempts state law or whether state laws can bar mandatory arbitration provisions. Additionally, the Commission's underlying conclusion that mandatory arbitration of issuer-investor claims is permitted under the securities laws may itself be subject to future litigation.
Footnotes
1 SEC, Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory Arbitration Provisions (Sept. 17, 2025), https://www.sec.gov/files/rules/policy/33-11389.pdf.
2 Paul S. Atkins, Policy Statement Concerning Mandatory Arbitration (Sept. 17, 2025), https://www.sec.gov/newsroom/press-releases/2025-120-sec-issues-policy-statement-clarifying-mandatory-arbitration-provisions-will-not-affect?utm_medium=email&utm_source=govdelivery.
3 Section 8(a) of the Securities Act of 1933, 15 U.S.C. § 77h(a).
4 Rule 461 of the Securities Act, 17 CFR 230.461.
5 See Wilko v. Swan, 346 U.S. 437, 434-35 (1953).
6 Section 14 of the Securities Act, 15 U.S.C. § 77n; Section 29(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(a).
7 Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 486 (1989).
8 American Express Co. v. Italian Colors Restaurant, 570 U.S. 228, 233 (2013).
9 SEC, Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory Arbitration Provisions, 2 (Sept. 17, 2025), https://www.sec.gov/files/rules/policy/33-11389.pdf.
10 8 Del. C. § 115(c) ("With respect to claims that are not internal corporate claims, the certificate of incorporation or bylaws may require stockholders, when acting in their capacity as stockholders or in the right of the corporation, to bring any or all such claims only in 1 or more prescribed forums or venues, if such claims relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors or officers; provided that such requirement is consistent with applicable jurisdictional requirements and allows a stockholder to bring such claims in at least 1 court in this State that has jurisdiction over such claims.").
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