FOR IMMEDIATE RELEASE
Friday, March 16, 2018
Contact: Nick Jacobs, 202-618-6430 or email@example.com
Washington, D.C. – The executive directors of Public Citizen and Better Markets, two of the nation’s leading organizations protecting investors, called on U.S. Securities and Exchange Commission (SEC) Chair Jay Clayton to reject any proposals that would allow publicly traded companies to force their investors into mandatory arbitration, through obscure clauses in initial public offering (IPO) documents or otherwise. Such action would deprive investors of their right to access the justice system if they are scammed or cheated and would allow companies to pocket their ill-gotten gains, sometimes amounting to hundreds of millions of dollars.
“Corporations have invested a decade in a campaign to convince the SEC to permit them to slip forced arbitration clauses into IPOs, precisely because they know that only a tiny few will pursue cases on their own, before arbiters,” said Robert Weissman, president of Public Citizen.
Forced arbitration clauses, which use fine-print “take-it-or-leave it” agreements to rig the system, have become ubiquitous in modern society. These clauses deprive people of their day in court when they are harmed by violations of the law. Instead, people are forced into industry-biased, secretive arbitration proceedings with little right to appeal if arbitrators ignore the law or facts.
“Arbitration proceedings are like kangaroo courts where everything is stacked against the investor and the industry almost always wins. That’s why the industry has to force it on investors, who will be doubly victimized. First, when they are ripped off and, second, when they can’t get a fair hearing to recover their losses. Adding insult to injury, the company that rips them off will get to pocket a windfall of ill-gotten gains, often tens of millions of dollars. The SEC must not allow this,” stated Dennis M. Kelleher, president and CEO of Better Markets.
Industry and its allies, including at the regulatory agencies that are supposed to protect investors first and foremost, increasingly are pushing for this dramatic policy change.
Advocates for investors are resisting these attempts. Last month, U.S. Sen. Elizabeth Warren (D-Mass.) questioned Chairman Clayton on whether the SEC was prepared to allow companies to insert forced arbitration clauses into IPO documents. Also last month, SEC Commissioner Robert J. Jackson, Jr., and SEC Investor Advocate Rick Fleming both strongly and publicly cautioned the SEC against taking actions that would allow companies to force investors into arbitration.
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.