Ahead of SEC Meeting, Warren, Reed Press Chair on Move to Kill Investor Protections with Forced Arbitration

Ahead of SEC Meeting, Warren, Reed Press Chair on Move to Kill Investor Protections with Forced Arbitration

"If the Commission rolls back protections against forced arbitration, it would open the floodgates to companies adopting these provisions. This would eliminate the critical tool of private securities litigation for securities law enforcement, denying relief for investors and allowing misconduct to go unpunished."

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, and Senator Jack Reed (D-RI), wrote to Paul S. Atkins, Chairman of the Securities and Exchange Commission, regarding their concerns about potential changes to long-standing forced arbitration policies that protect investors. The letter comes after the Commission published a SEC Sunshine Act notice indicating its plans to amend the policy.

"We are concerned that the SEC may be poised to change its long-standing policies and allow public companies to force investors into arbitration rather than allowing them their day in court. This would be a significant mistake, putting investors and markets at risk," wrote the Senators.

The Senators warned that: "A reversal by the Commission of its decades-old policy with respect to forced arbitration would not be consistent with Section 14 of the Securities Act and Section 29(a) of the Securities Exchange Act."

"If the Commission rolls back protections against forced arbitration, it would open the floodgates to companies adopting these provisions," said the Senators. "This would eliminate the critical tool of private securities litigation for securities law enforcement, denying relief for investors and allowing misconduct to go unpunished. "

The Senators concluded by calling on Chair Atkins to reaffirm the SEC's consistent view that forced arbitration clauses are contrary to the public interest, and to provide a briefing to Committee staff on the SEC's plans, if any, to amend their existing forced arbitration policy.

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