The SEC’s New Forced Shareholder Arbitration Policy

On September 17, 2025, the Securities and Exchange Commission (SEC) reversed its decades-old policy – along a party-line vote, without public comment – that protected investors’ right to hold corporations publicly accountable for securities fraud.

Under the new policy championed by SEC Chairman Paul Atkins, public companies can now force shareholders into private, individual, mandatory arbitration, stripping investors of one of their most powerful tools for recovering losses and exposing corporate wrongdoing. With this forced shareholder arbitration policy change, the SEC is effectively greenlighting companies’ efforts to cut off securities fraud class action lawsuits, which are the key means by which federal and state investor protection laws have been enforced in proceedings that provide investors with full due process.

History has proven that legal cases filed by shareholders are a highly effective at  holding corporations accountable for violating the law, and enabling investors – including absent class members – to recover funds. In the past 30 years, investors have recovered approximately $100 billion from securities class actions. [Countering an Administration `Hell-Bent on Attacking Investor Rights']

The SEC’s forced shareholder arbitration about-face threatens to undercut robust shareholder enforcement, which is critical to the value and stability of our capital markets. Forced arbitration is not a sufficient, transparent, or efficient forum for investors to vindicate their rights or recoup their losses. Forced arbitrations are not public; they lack consistent procedures, preclude collective or class action, do not result in published, precedential opinions, and deprive parties of the opportunity to appeal decisions. Forced shareholder arbitration likewise promises negative consequences for companies, which will face immediate legal challenges resulting in significant risk and expense if they seek to adopt these provisions—and numerous time-consuming and costly individual compulsory arbitrations if these provisions are allowed to stand. Less transparency means less deterrence of legal violations, and – as a result – less stability and trust in the markets.

Past attempts to impose forced shareholder arbitration provisions have been broadly and consistently rejected on multiple occasions for good reason: they heavily tilt the scales in favor of corporations at the expense of shareholder rights and investor confidence. Between 2009 and 2019, various public companies rejected proposals to put forced shareholder arbitration provisions into their bylaws—and the SEC unwaveringly sided with those companies’ determinations. In 2020, public company Intuit presented a shareholder proposal that would have forced all shareholder cases into individual forced arbitration; when the vote was called, it received less than 2.5 percent of shareholder support.

The SEC’s forced shareholder arbitration policy change effectively wipes out decades of protections for shareholders, diminishing investor confidence and threatening the value and security of U.S. capital markets and our economy. It is imperative that the Commission’s policy change be reversed.