Jeff Lubitz is Head of ISS Securities Class Action Services, Institutional Shareholder Services, Inc. This post is based on an ISS publication by Elisa Mendoza, Vice President with ISS Securities Class Action Services.
Though IPO-related class actions accounted for just four percent of all securities class actions over the past decade, according to ISS Securities Class Action Services (SCAS) data, much ink has been spilled in recent months over whether the U.S. Securities and Exchange Commission (SEC) might bar IPO-related lawsuits in lieu of arbitration. Supporters of arbitration argue that it would eliminate frivolous shareholder litigation and provide a more efficient way for investors to seek redress. [1] Treasury Department officials argue the change could be a way to “reduce costs of securities litigation for issuers in a way that protects investors’ rights and interests,” according to Bloomberg. [2] The change, proponents contend, would incentivize more companies to go public on the U.S. markets. This potential change to the SEC’s long-standing position would effectively give credence to the contention by advocates of mandatory arbitration that the burdens and expense of securities class action lawsuits are among the factors that have led to a decline in the number of IPOs in the U.S. in recent years. [3]
