SEC Issues Policy Statement Clarifying that Mandatory Arbitration Provisions Will Not Affect Effectiveness of Registration Statements

The Securities and Exchange Commission today published a policy statement to announce that decisions about whether to accelerate the effectiveness of a registration statement will not be affected by the presence of a provision requiring arbitration of investor claims arising under the federal securities laws.

"As an agency that trumpets the importance of disclosure and transparency, the Commission's lack of a recent public position on this important topic is unmoored from both its mission and its mandate. That ends today," said Chairman Paul S. Atkins.

"While many people will express views on whether a company should adopt a mandatory arbitration provision, the Commission's role in this debate is to provide clarity that such provisions are not inconsistent with the federal securities laws," Chairman Atkins continued. "We have fulfilled that role through the issuance of this policy statement."

Issuers have periodically asked whether a mandatory arbitration provision for investor claims arising under the federal securities laws would impact the acceleration of the effectiveness of their registration statement. Today's statement provides the Commission's view that, based on the Supreme Court's current interpretation and application of the Federal Arbitration Act, the existence of such a provision will not impact determinations whether to accelerate the effective date of a registration statement.

As a result, when deciding on whether to accelerate effectiveness of a registration statement, the Commission staff will focus on the adequacy of the registration statement's disclosures, including disclosure regarding the arbitration provision.