SEC says mandatory arbitration clauses will not hold up IPO registrations
On 17 September 2025 the SEC issued a policy statement that a provision requiring investors to arbitrate federal securities claims will not affect its decisions to accelerate the effectiveness of registration statements. Staff will look instead at whether the provision is adequately disclosed. Whether such provisions are valid under state law remains a separate question.
The US Securities and Exchange Commission (SEC) issued a policy statement on 17 September 2025 (release 33-11389) on issuer-investor mandatory arbitration provisions.
What it says
- Whether a company's charter or bylaws require investors to arbitrate claims under the federal securities laws will not affect the SEC's decision to accelerate the effectiveness of a registration statement.
- The Commission based this on the Supreme Court's reading of the Federal Arbitration Act.
- Staff will focus on whether the registration statement adequately discloses the arbitration provision.
- The SEC does not decide whether a provision is enforceable under state corporate law.
Who is affected
Companies planning US registered offerings or listings, and the boards and company secretaries who draft charters and bylaws.
What to do
Any company considering a mandatory arbitration provision needs advice on state law and investor reaction, and must disclose it clearly.