Acceleration of Registration Statement Effectiveness: Proper Disclosure, Not Existence, of Mandatory Arbitration Provisions Is What Matters, Says SEC

The Bottom Line

The Securities and Exchange Commission (SEC) will no longer deny requests for the acceleration of a registration statement solely on the basis that a registrant’s corporate charter or bylaws or other governing document includes a provision requiring arbitration of investor claims arising under the federal securities laws (a “mandatory arbitration provision”).

The SEC staff will instead focus on the adequacy of the registration statement’s disclosures, including disclosure regarding any mandatory arbitration provision. Public companies (and companies planning to go public) should weigh the benefits and risks of including such provisions in their governing documents going forward.

Summary of the Policy Statement

In a reversal of its staff’s longstanding practice, dating back to 1990, on September 17, 2025, the SEC issued a policy statement declaring that the presence of a mandatory arbitration provision will not impact decisions whether to accelerate the effectiveness of a registration statement. In essence, the SEC will not deny requests for the acceleration of a registration statement solely on the basis that a registrant has a mandatory arbitration provision in its corporate charter or bylaws or other governing documents.

Instead, in considering acceleration requests, the SEC staff will focus on the adequacy of the registration statement’s disclosures, including disclosure regarding any mandatory arbitration provision, consistent with its mandate of ensuring investors have complete and adequate disclosure to make informed investment decisions.

The SEC’s power to accelerate the effectiveness of a registration statement stems from Section 8(a) of the Securities Act of 1933 (the “Securities Act”), which requires the SEC to consider the adequacy of the information about the issuer and the securities to be offered, as well as “the public interest and the protection of investors,” in exercising that power.  In addressing the public interest consideration, the SEC noted that governing case law instructs that, in considering the public interest and the protection of investors, only matters over which the SEC has authority under federal securities laws may be considered.

Taking this into account, the SEC, relying on Supreme Court jurisprudence interpreting and applying the Federal Arbitration Act of 1925 (the FAA), concluded that (i) in the context of mandatory arbitration provisions, “the Federal securities statutes do not override the [FAA’s] policy favoring the enforcement of arbitration agreements” and (ii) because they do not override the FAA in that context, the existence of a mandatory arbitration provision is not an appropriate consideration under Section 8(a)’s public interest and investor protection standard.

Notably, based on Supreme Court jurisprudence, the SEC, in reaching that conclusion, expressed the view that:

• “The inability to proceed in a judicial forum as a result of [a mandatory arbitration provision] would not violate the anti-waiver provisions of the Federal securities statutes”—referring to Section 14 of the Securities Act and Section 29(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), which void any requirement that a person “waive compliance with any provision” of those statutes or rules or regulations made under them;
• “Nothing in the Federal securities statutes demonstrates a clear and manifest congressional intention to displace the FAA in the context of [mandatory arbitration agreements]”; and
• The Securities Act and the Exchange Act, both of which were enacted before class-action proceedings were permitted, “do not expressly include a right to proceed through class actions or collective actions” and “do not guarantee an affordable procedural path to the vindication of every claim.”

Practical Considerations

Public companies (and companies planning to go public) considering including a mandatory arbitration provision in their governing documents must consider several factors, including:

• Whether such provisions are enforceable under applicable state corporate law. For example, the SEC noted in its policy statement that new Section 115(c) of the Delaware General Corporation Law, which became effective on August 1, 2025, may prohibit Delaware corporations from including a mandatory arbitration provision in their charters or bylaws. New Section 115(c) permits the charter or bylaws to prescribe a forum or venue for certain claims that are not internal corporate claims but only if a stockholder may bring such claims in at least one Delaware court with jurisdiction.   
• Litigation risk. Given that the Supreme Court, as well as many, if not all, state courts have not ruled on the enforceability of arbitration provisions in the context of a corporation’s governing documents, mandatory arbitration provisions may be subject to litigation, including on their enforceability under the FAA (which expressly covers written provisions in “contract[s] evidencing transaction[s] involving commerce”) or applicable state corporate law.
• Investor perception. Public companies must consider that investors may have different views on such provisions, which might impact demand for their stock and views on their governance practices.

Companies that opt for mandatory arbitration provisions must include complete and accurate disclosure about the provision, including material risks to investors such as the costs of pursuing a remedy in arbitration (especially where the provision includes a class action waiver), limited recourse to the courts, and any uncertainties about its enforceability.

Subscribe to Ropes & Gray Viewpoints by topic here.