Will SEC End the Ban on Forced Arbitration for Public Companies?

Mar 06,2018

Under SEC regulations, companies are not allowed to go public if they ban shareholders from seeking damages through class-action lawsuits. But consumer advocates are concerned the current administration might be moving toward allowing companies to ban class-actions. This could be problematic for investors, as class-actions lawsuits serve as a way to keep companies accountable.

SEC chairman Jay Clayton has said that turning around the U.S.’s decline in initial public offerings (IPOs) is one of his main priorities. According to some who argue for mandatory arbitration, the threat of class-action lawsuits causes many companies to remain private.

The Problem for Investors

But allowing companies that ban class-actions to go public could be detrimental to investors. The SEC, while essential for regulating the industry, has historically been less successful in recovering money for wronged investors, compared with private lawsuits. For example, in the mid-2000s during the crises involving Enron, WorldCom, Tyco, Bank of America and Global Crossing, the SEC enforcement actions recovered penalties and fees of $1.8 billion. Through private litigation, though, investors recovered $19.4 billion.

“Research consistently shows that Americans are against forced arbitration clauses. Let’s hope the SEC and the current administration listen to consumers and continue to ban forced arbitration,” said Attorney Walter Clark, founder of Walter Clark Legal Group.

Our firm has been handling personal injury cases throughout the California Low Desert and High Desert communities for over 30 years. With a 95% success rate, the personal injury attorneys at Walter Clark Legal Group will fight to hold those responsible for your loss accountable and win compensation to cover medical bills, lost wages, and pain and suffering. If you have been injured and want to discuss your legal options, contact us today for a free consultation with an experienced personal injury lawyer. We have offices in Indio, Rancho Mirage, Victorville, and Yucca Valley and represent clients through the entire California Low Desert and High Desert communities.

DISCLAIMER: The Walter Clark Legal Group blog is intended for general information purposes only and is not intended as legal or medical advice. References to laws are based on general legal practices and vary by location. Information reported comes from secondary news sources. We do handle these types of cases, but whether or not the individuals and/or loved ones involved in these accidents choose to be represented by a law firm is a personal choice we respect. Should you find any of the information incorrect, we welcome you to contact us with corrections.