By Sarah N. LynchWASHINGTON, July 17 (Reuters) - A key U.S. securities
regulator on Monday voiced support for possibly allowing
companies to tuck language into their initial public offering
paperwork that would force shareholders to resolve claims
through arbitration rather than in court.
"For shareholder lawsuits, companies can come to us to ask
for relief to put in mandatory arbitration into their charters,"
said Michael Piwowar, a Republican member of the U.S. Securities
and Exchange Commission. "I would encourage companies to come
and talk to us about that."
Piwowar's comments, which he made during an appearance at
the conservative-leaning Heritage Foundation, come just a few
days after the SEC's new Chairman Jay Clayton signaled plans to
scale back regulatory burdens that may be discouraging or
delaying companies from going public. [nL1N1K31HZ]
As part of that plan, Clayton invited companies to petition
the SEC for exemptions from certain disclosure requirements.
Clayton did not specifically mention requests to include
mandatory arbitration provisions in public offering documents,
but Piwowar said he thinks the issue falls more broadly into
efforts by the SEC and its new Corporation Finance Division
Director to be more collaborate in how it works with companies
during the IPO review process.
Corporate interest groups and Republicans have long
complained about what they see as the frivolous filing of
shareholder class action suits, and often advocate for the use
of mandatory arbitration to reduce the amount of litigation.
Stock brokers routinely include such provisions in their
account agreements with customers, but companies selling their
shares to the public do not.
The issue garnered attention in 2012, when the SEC pressured
private equity firm Carlyle Group L.P. <CG.O> to drop a
mandatory arbitration requirement before the regulator would
sign off on its IPO plans.
Most recently, the fight over mandatory arbitration erupted
between Republicans and the Consumer Financial Protection
Bureau, which under the direction of Obama appointee Richard
Cordray adopted rules banning banks and credit card companies
from blocking customers from participating in class actions.
Piwowar on Monday declined to elaborate on some of the plans
in the works at the SEC to relax regulations for companies,
saying he would defer to Clayton.
However, he said he would support exploring whether to
eliminate rules which permit only "accredited investors," or
those with a net worth of a $1 million plus, to invest in higher
risk private stock deals.
"I'd like to ... question the premise of even having these
artificial distinctions," he said.
(Reporting by Sarah N. Lynch; Editing by Chizu Nomiyama)
Keywords: USA SEC/ARBITRATION