On September 17, 2025, the Securities and Exchange Commission (SEC) held an open meeting to consider issuing a policy statement to clarify that the presence of a provision requiring arbitration of investor claims arising under federal securities laws would not affect the SEC’s decisions on the acceleration of registration statement effectiveness, among other topics. Following the proposal’s approval by a 3–1 vote, the SEC has since published the formal policy statement, offering clear guidance for issuers and market participants.
In the published policy statement, the SEC affirmed that the presence of a mandatory arbitration provision in a registration statement will not impact the SEC’s decision about whether to accelerate the effectiveness of the registration statement. The staff’s review of registration statements will instead focus on the adequacy of disclosures, including those for arbitration provisions, rather than the substance of the arbitration clause itself.
The SEC determined that mandatory arbitration clauses are not inconsistent with federal securities laws and do not violate anti-waiver requirements, but emphasized that companies must still consider the validity of these provisions under state law (for example, Delaware prohibits public companies from subjecting stockholder disputes to mandatory arbitration). The policy statement is grounded in Supreme Court jurisprudence, which strongly favors enforcement of arbitration agreements under the Federal Arbitration Act (FAA) unless Congress has clearly expressed an intent to override the FAA; the SEC did not find this congressional intent in the federal securities statutes. The SEC acknowledged concerns that mandatory arbitration may limit investors’ ability to pursue class actions. However, the SEC concluded that federal securities statutes do not guarantee class action rights, and the FAA’s mandate controls even if bilateral arbitration reduces the economic incentive for some investors to bring claims.
Against a backdrop of evolving regulatory priorities, this development marks a significant shift from the SEC’s approach in recent years. As recently as 2019, then-Chairman Jay Clayton issued a statement indicating that the SEC would not pursue rulemaking or policy changes for mandatory arbitration provisions in registration statements and that any such clauses would be considered on a case-by-case basis. The debate within the SEC has continued across administrations and in different forms: in December 2024, Commissioner Hester Peirce acknowledged that arbitration may offer a less expensive and burdensome alternative to litigation for resolving disputes between investors and advisers. At the open meeting, Peirce noted that a formal policy statement will allow investors to assess for themselves whether a mandatory arbitration provision is positive, negative, or neutral when deciding where to invest.
The SEC’s policy statement provides clear guidance to companies contemplating an IPO that mandatory arbitration clauses are permissible under federal law. This policy statement could impact how companies structure their dispute resolution mechanisms and how the SEC evaluates registration statements for acceleration. In light of this updated guidance, market participants should consult legal counsel to evaluate state-law implications before including mandatory arbitration provisions in registration statements.
Alston & Bird can assist companies in evaluating the implications of mandatory arbitration provisions under the SEC’s new framework, advise on compliance with both federal securities laws and relevant state corporate law, and help ensure registration statements and disclosures are prepared in line with the latest guidance and policy statements.
If you have any questions, or would like additional information, please contact one of the attorneys on our Capital Markets & Securities team or one of the attorneys on our Securities Litigation team.
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