Entry 13: SEC Opens the Gate: Arbitration Over Justice
Paul Atkins sat at the hearing table, his chin resting on his hand, the microphone before him like a preacher’s pulpit. The water bottle was sweating beside him. The room was quiet, but not still. It was the kind of quiet that comes before a change—before something old is broken and something new, uncertain, takes its place.
On Wednesday, the Securities and Exchange Commission, under Atkins’ chairmanship, gave public companies a new tool. Not a tool for building, but for shielding. Shielding themselves from the voices of their own shareholders. The SEC would no longer block companies from going public if it banned class-action lawsuits. The old policy, worn and weathered by decades of use, was torn up. In its place: arbitration. Private. Quiet. Out of sight.
Make IPOs Great Again
Atkins, with the confidence of a man who’s seen the map and drawn new borders on it, pledged to “make IPOs great again.” He spoke of eliminating burdens, of freeing companies from the tangles of compliance and the fog of legal uncertainty. He spoke of clarity, but the kind that comes from silence, not sunlight. Commissioner Hester Peirce nodded in agreement. “The market will do a better job than we can,” she said. As if the market were a wise old judge, and not a creature of appetite, driven by the herd and the fear of missing out.
The Tide Turns
The SEC’s new path is part of a larger current—one flowing from the White House, where deregulation is the gospel. The Biden-era enforcement, with its sharp teeth and loud bark, is being muzzled. In its place, a softer hand. One that pats the back of business and asks little in return. But not everyone is quiet. Elizabeth Warren and Jack Reed, senators with the grit of old miners, sent a letter. “A significant mistake,” they warned. “It puts investors and markets at risk.” Their words were not loud, but they were heavy. Shareholder advocates echoed the alarm. They spoke of transparency, of balance, of the fragile trust that makes the world’s biggest capital markets work. Arbitration, they said, tilts the scales. It hides the truth. It makes the powerful more powerful, generating fees for Wall Street and never for Main Street.
Delaware and the Drift
The change won’t flood the markets overnight. Delaware, the old fortress of incorporation, still bans arbitration for federal securities claims. But even Delaware feels the pull. Texas and Nevada, younger and hungrier, are drawing companies away. The battle is quiet, but fierce.
The Cost of Silence
In 2024, US-listed companies paid $3.7 billion to settle securities class-action suits. That’s not just money—it’s accountability. The number of settlements has danced between 72 and 105 over the past decade. The payouts have ranged from $1.9 billion to $7.4 billion. Behind each figure is a story—a wrong made right, a truth brought to light.
Commissioner Caroline Crenshaw, a voice of dissent, pointed to the contrast. The SEC’s own enforcement actions returned just $345 million to harmed investors last year. Arbitration, she said, lets companies keep their ill-gotten gains. It’s not justice—it’s a ledger.
Wise investors who have been through many market cycles of the bull market remember. The people on main street with their 401s remember. And when the law forgets them, they find other ways to speak. The SEC may have opened the gate, but the road ahead is long—and the dust has only begun to rise.
ENDS
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