mandatory arbitration bylaws

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Salvatore Graziano

As readers may recall, in September, the SEC announced that it had revised its policy on whether prospective IPO companies may have their registration statement declared effective if the companies have mandatory arbitration bylaws, as discussed in detail here. In the following guest post, Salvatore Graziano, a partner in the Bernstein Litowitz Berger & Grossman LLC law firm and a member of the firm’s Executive Committee, provides his views on the SEC’s changed policy and suggests the implications the changed policy may have for D&O insurers. My thanks to Sal for allowing me to publish his article on this site. Here is Sal’s article.Continue Reading Guest Post: Will Allowing Companies to Block Shareholder Suits Create a D&O Mess?

It is no secret that SEC Chair Paul Atkins has ideas about how U.S. securities laws could be reformed to “revitalize” America’s capital markets. Among other things, late last year Atkins proposed a number of revisions to the current U.S. public company disclosure regime. Now, in a speech earlier this week, Atkins floated several additional proposed reforms, among other things referring to the possibility of loser-pays bylaws for shareholder suits and of a “safe harbor” for public company disclosures concerning widely publicized events. As discussed below, Atkins’s recent ideas have a long and relevant history. The text of Atkins’s February 17, 2026, speech can be found here.Continue Reading SEC Chair Atkins Proposed Further Securities Litigation and Disclosure Reform

The idea that companies might be able to avoid securities class action litigation through the adoption of bylaws requiring securities law claims to be submitted to arbitration has been around for years.

Traditionally, the SEC has opposed these types of bylaw provisions. However, in an interesting development, on September 17, 2025, the Commission, in a new policy statement approved by a 3-1 vote along party lines, announced that the decision whether or not to “accelerate the effectiveness of a registration statement” will “not be affected” by the presence of provision requiring the arbitration of investor claims arising under the federal securities laws.

This development suggests that in the future IPO investors could find themselves compelled to arbitrate securities law claims rather than being able to file a securities class action, although, as noted below, there is a lot more that is yet to be told on these issues.Continue Reading SEC Revises Policy on Arbitration Provisions in IPO Companies’ Bylaws

One idea that resurfaces from time to time is the suggestion that companies ought to adopt bylaw or charter provisions mandating the arbitration of shareholder claims, including claims under the federal securities laws. The current SEC Chair, Jay Clayton, has said that he does not consider the issue to be a top priority, seemingly shelving the idea for the time being. But various contending parties have continued to agitate on the issue.

In a recent white paper issued by a consumer advocacy group and signed by a number of prominent securities law professors, the professors state their view that Delaware law does not permit federal securities law claims to be resolved in arbitration or in any specific forum. The white paper is sure to stir the pot. As discussed below, it could also have an impact on a case currently pending in Delaware state court that could dictate whether or not Delaware companies may designate a federal court forum for the resolution of claims under the federal securities laws.
Continue Reading Delaware Law and Mandatory Shareholder Claim Arbitration Provisions

As I have noted in prior posts, a number of commentators have proposed that companies filing with the SEC to complete IPOs ought to be able to include in their bylaws a mandatory arbitration provision requiring shareholder claimants to submit claims – including even claims under the federal securities laws – to arbitration. This idea, which has been percolating for years, received a significant boost in a statement last summer from outgoing SEC Commissioner Michael Piwowar, in which he suggested that the SEC would favorably view submissions by IPO companies that included bylaw provisions requiring mandatory arbitration of securities claims. As detailed in an April 23, 2018 paper from Elisa Mendoza of ISS Securities Class Action Services entitled “The Uncertain Role of IPOs in Future Class Actions” (here), this idea has its critics. But what might this kind of mandatory arbitration proposal, if put into action, actually mean for securities class action litigation going forward? Mendoza’s paper helpfully takes a statistical look at this question in light of historical securities litigation involving IPO companies.
Continue Reading IPO-Related Securities Litigation and the Idea of Shareholder Claim Mandatory Arbitration

One of the trendy concepts in certain circles in recent years has been the idea of litigation management bylaws – that is, the adoption by company of bylaw provisions that help manage the company’s litigation risks. For example, one bylaw provision that has been widely adopted by publicly traded companies is a forum selection provision specifying a particular jurisdiction as the preferred forum for litigating shareholder disputes.

Another one of the proposed litigation management bylaws that has proven more controversial is the idea of a mandatory arbitration clause, requiring shareholder claimants to submit claims – including even claims under the federal securities laws – to arbitration. This idea, which has been percolating for years, received a significant boost in a statement from SEC Commissioner Michael Piwowar. In a recent letter to a member of Congress, SEC Chair Jay Clayton weighed in with his views on the topic, suggesting that the idea is not a particular priority for him. But aspects of his communication and of the current state of debate on the issue suggest that the idea is probably not going to just go away.
Continue Reading Mandatory Arbitration of Shareholder Claims: What’s the Latest?

SEC Commission Michael Piwowar caused quite a stir last summer when he suggested that the SEC would favorably view submissions by IPO companies that included bylaw provisions requiring mandatory arbitration of securities claims. The idea of mandatory arbitration for shareholder claims has continued to circulate in the intervening months. In the past few days, several current and former SEC Commissioners and SEC representatives have weighed in on the issue, mostly to pour cold water on the idea. Because I believe this idea will continue to percolate, I survey the latest statements below. Even though the most recent statements strongly suggest a lack of support for the idea in many circles, I suspect we will continue to hear more about this issue.
Continue Reading The Latest on Proposed Mandatory Arbitration of Shareholder Claims

Allen_Claudia_2013_Color[1]For many years, business groups and corporate representatives have tried to reform shareholder litigation through legislation and case law development, with mixed success. However, in more recent years an interesting new initiative has emerged – the attempt to achieve litigation reform through amendments to corporate bylaws. This effort received a significant boost last year when …