Going public is a landmark moment for any company. It opens doors to new capital, enhances brand visibility, and fuels growth. At the same time, the IPO and public offering (PO) process brings heightened legal and regulatory scrutiny. Among the greatest risks are costly and time-consuming disputes.
With the Securities and Exchange Commission’s (SEC) recent policy shift, companies now have a valuable new tool to manage these risks—arbitration. The American Arbitration Association® (AAA®) and its international division, the International Centre for Dispute Resolution® (ICDR®), are uniquely positioned to guide businesses through this new era of dispute resolution.
What Changed at the SEC
On September 17, 2025, the SEC adopted a major policy change. After reviewing recent caselaw developments, the Commission stated that “we believe that the inability to proceed in a judicial forum as a result of an issuer-investor mandatory arbitration provision would not violate the anti-waiver provisions of the Federal securities statutes.” The SEC further announced that: “…the presence of a provision requiring arbitration of investor claims arising under the Federal securities laws will not impact decisions regarding whether to accelerate the effectiveness of a registration statement.”
In practical terms, this means that companies registering securities with the SEC in connection with their initial public offering are now free to adopt issuer-investor arbitration clauses in their organizational documents without fear that such provisions will delay or prevent approval of their IPO registration statements. Similarly, companies that are already public may now also take steps to adopt such arbitration provisions going forward without fear of effectively foreclosing future access to new securities offerings or otherwise inviting SEC scrutiny.
Effective Date: September 19, 2025
- Why so fast? Because this was a policy shift, not a regulation, the SEC was able to implement it without going through the lengthy rulemaking process.
- Neutral stance: The SEC will no longer pass judgment on whether mandatory issuer-investor arbitration provisions are “good” or “bad.” Instead, it will focus on the adequacy of disclosures regarding the arbitration process.
This change underscores the importance of selecting a reputable, independent, and transparent arbitral forum—factors that can reassure both investors and regulators.
AAA-ICDR’s Response
To meet the needs of businesses and investors under this new policy, the AAA-ICDR has:
- Created a specialized panel of arbitrators with deep experience in financial markets, securities law, and SEC registration matters.
- Developed tailored guidelines to address the unique considerations of arbitration in disputes relating to the federal securities laws and the offering process.
- Expanded resources to support fair, efficient, and effective resolution of federal securities-related conflicts.
Benefits of Arbitration in IPO and PO Disputes
By incorporating AAA-ICDR arbitration clauses into offering documents, companies and investors can take advantage of:
- Expertise: Access to arbitrators with specialized knowledge in complex securities and financial disputes.
- Efficiency: Faster resolution compared to traditional litigation.
- Cost savings: Reduced legal fees and delays.
- Fairness and Predictability: A structured and reliable forum for dispute resolution.
Looking Ahead
The SEC’s policy shift creates an opportunity for companies to proactively manage risk, especially in public offerings.
By working with the AAA-ICDR, businesses can resolve disputes with confidence and continue focusing on their most important goal: delivering long-term value as a public company.