SEC Actions Regarding Mandatory Arbitration Bylaw Provisions
Publication Date: February 20, 2019

On February 11, 2019, the SEC’s Division of Corporation Finance responded to a no action request for a company seeking to exclude from its proxy statement a shareholder proposal, which would have required the company to arbitrate all claims brought by investors under federal securities laws and would have precluded investors from bringing such claims as a class. Relying upon a submission from the Attorney General of New Jersey, which stated that the proposal would violate state law, the SEC Staff concluded that it would not recommend enforcement action should the company decide to exclude the proposal on the grounds that it would violate state law. Chairman Clayton issued a statement supporting the Staff’s decision, but also noting that the SEC Staff did not address the legality of mandatory shareholder arbitration in the context of federal securities laws, and emphasizing that any SEC policy decision on the ability of domestic, publicly-listed companies to require shareholders to arbitrate claims against them arising under the federal securities laws should be made by the Commission.

View the No-Action Letter here >>

View Chairman Clayton’s statement here >>