Investors warn forced arbitration will fuel fraud, heighten corporate risk and costs, and destroy shareholder value.

A coalition of more than 60 major institutional investors and pension systems, collectively managing trillions of dollars in direct assets and representing over $8 trillion globally through umbrella organizations and associations, released a letter this week strongly opposing the Securities Exchange Commission’s (SEC) unprecedented policy reversal permitting companies to include forced arbitration provisions into their corporate charters and registration statements.

The letter, signed by dozens of funds hailing from states across the US, including Thomas DiNapoli, Trustee of the New York State Common Retirement Fund, Brad Lander NYC Comptroller and investment advisor to the New York City Retirement Systems, the National Coordinating Committee for Multiemployer Plans, among others, warns that the policy change will strip investors of their established right to hold companies accountable through class action lawsuits and deter fraudulent conduct, and that as a result fraud will proliferate. As noted by SEC Commissioner Caroline Crenshaw in her statements opposing the policy change, securities class actions returned $3.7 billion to defrauded investors in 2024 alone, compared to only $345 million recovered through SEC enforcement actions.

“As fiduciaries, multiemployer plan trustees have a legal duty to protect their participants’ retirement, health, and other welfare benefits. This SEC policy change makes that duty far more difficult to fulfill by stripping plans of established legal tools to recover losses when companies defraud investors. Forced arbitration creates costly, uncertain, and inefficient proceedings that benefit no one—not participants, not plan sponsors, and ultimately not the companies themselves. NCCMP urges the SEC to reverse this harmful policy that puts millions of working families at risk,” said Michael D. Scott, Executive Director, National Coordinating Committee for Multiemployer Plans (NCCMP).

In the letter, the institutional investors emphasize that forced arbitration will not only harm investors, but also companies. Any company attempting to impose such provisions will face immediate legal challenges creating costly uncertainty.

And if upheld, companies will face numerous individual arbitrations forcing executives to respond to potentially hundreds of separate discovery requests and depositions with no mechanism for efficient resolution.

Further, D&O insurance premiums will undoubtedly rise due to the uncertainty of the number of claims that will be brought. And, rather than “making IPOs great again”, as SEC Chair Atkins claims, such provisions will significantly harm US markets, decrease shareholder and company value and make US companies less – not more – attractive to investment.

In addition to the letter, multiple funds and investor entities such as the California Public Employees’ Retirement System (CalPERS), the Council of Institutional Investors (CII), and the International Corporate Governance Network (ICGN), issued their own letters and statements vehemently opposing forced arbitration of securities claims, reinforcing widespread investor concern about the erosion of shareholder rights.

In addition to being among the largest institutional investors in the world, public pension funds and Taft-Hartley union pension funds are the retirement plans for hundreds of thousands of hard-working Americans, including teachers, nurses, dock workers, truckers, firefighters, police officers, and other first-responders.

The coalition is calling on the SEC to promptly reverse course and restore investor protections. To join the coalition, please complete the form below to add your name to the letter. To learn more, read SEC Upends Decades of Precedent and Endorses Forced Arbitration Provisions in IPOs in the Shareholder Advocate.

Join the Coalition

Whistleblowers Encouraged to Step Forward to Help Enforcement Efforts

By Christina McGlosson

During the summer of 2025, both the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) announced a refocus on retail investor harm, insider trading, accounting fraud, and in particular, investor harm involving foreign actors.

2025 Summer Enforcement Actions

Between June and August 2025, the SEC commenced 52 enforcement actions, with 85 defendants or respondents, broken down by fraud type:

The CFTC, by contrast, did not file any new actions in that period.

Highlighted SEC Actions

Here’s a look at a few of the actions that comprise some of the numbers in the chart, above.

Investment Adviser Matters

• TZP Management Associates: On Aug 15, the SEC settled an action involving the calculation of fee offsets. The firm allegedly failed to include interest earned on deferred transaction fees in the offset calculation, thereby charging excess management fees. It also allegedly used a pro rata basis rather than full transaction fees, reducing the offset. The investment adviser agreed to disgorgement, interest, and a civil penalty.
• Retail adviser firms: Two firms faced enforcement actions for failing to disclose conflicts arising from incentive compensation. In one matter, advisers had performance goals tied to assets under a discretionary program; the SEC said that conflicts were not disclosed. Both investment advisers settled, paying significant penalties and disgorgement. In the Matter of Empower Advisory Group, LLC and Empower Financial Services, Inc. settled Aug. 29 and In the Matter of Vanguard Advisers, Inc. settled Aug. 29.
• Cherry‑picking scheme: In North East Asset Management Group, Inc. the SEC alleged that profitable trades were allocated disproportionately to preferred accounts (e.g. of the principal or family), while less favorable trades went to others. The June 3 settlements included disgorgement, interest, and penalties.
• American Portfolios Advisors, Inc. and former executives: The SEC alleged breach of fiduciary duties, nondisclosures of conflicts, overbilling, and the creation of backdated documents during an examination. Only July 11, the Investment Adviser and two executives agreed to penalties and other relief.
• Record‑modification by compliance officer: In Suzanne Ballek’s case, the SEC alleged she modified and even manufactured pre‑clearance trading forms during an investment adviser’s SEC exam. On July 15, Ballek consented to a cease‑and‑desist order and paid a penalty.
• Custody Rule violations: Munakata Associates LLC was charged with failing to satisfy the independent verification requirement under the Custody Rule. The investment adviser’s president had control or access over client accounts but failed to carry out independent verifications. The Aug. 1 settlement included a penalty.

Offering Fraud and Securities‑Based Swap Matters

• The3rdBevco Inc. and CEO Peter Scalise III: On June 17, the SEC settled claims that the company and CEO misled investors about a supposed celebrity brand collaboration (which never existed), misappropriated funds, and sold unregistered securities. Disgorgement, interest, and penalties were part of the settlement.
• MUFG Securities EMEA (a foreign security‑based swap dealer, or SBSD): The SEC alleged failures in recordkeeping, internal supervision, reporting, and false statements in its registration. The SEC claimed it did not adequately maintain required U.S. records and misrepresented that it would adopt required policies. On Aug. 6, the firm agreed to pay a $9.8 million penalty.

Whistleblowers play a critical role in ensuring the integrity of the U.S. and global financial markets. Both the SEC and CFTC rely on whistleblowers to help them enforce violations of the federal securities laws and the Commodity Exchange Act. If you have witnessed fraud, consider blowing the whistle.

What to Do if You Have Witnessed Fraud:

1. Speak with an Experienced Whistleblower Attorney: Contact an experienced whistleblower attorney who understands the SEC and CFTC whistleblower programs. These consultations at Cohen Milstein are confidential and free of charge. Counsel can guide you through the process and assist in preparing and submitting your Tip, Complaint, and Referral (Form TCR) to the SEC or CFTC.
2. Gather Your Information: Along with your personal observations and a completed Form TCR, the SEC and CFTC requires supporting information that is original and not in the public sphere.
3. Understand the Potential for a Whistleblower Award: If your information leads to a successful SEC or CFTC enforcement action resulting in more than $1 million in monetary sanctions, you may receive an award ranging from 10-30% of any amount collected.

The SEC’s Whistleblower Program and the CFTC’s Whistleblower Program provide comprehensive guidelines on reporting fraud and the whistleblower process. Access the Tip, Complaint or Referral (TCR) forms: SEC Form TCR and the CFTC Form TCR.

About the Author

Christina McGlosson, special counsel in Cohen Milstein’s Whistleblower practice, focuses exclusively on Dodd-Frank Whistleblower representation She is the former acting director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was a senior attorney in the SEC’s Division of Enforcement, where she assisted in drafting the SEC rules to implement the whistleblower provisions of Dodd-Frank and served as Senior Counsel to the Director of the SEC’s Division of Enforcement and to its Chief Economist.

Christina represents whistleblowers in the presentation and prosecution of fraud claims before the SEC, CFTC, FinCEN, as part of the U.S. Treasury, the Department of Justice, and other government agencies.

Christina McGlosson, Special Counsel: Dodd-Frank Whistleblower Practice

Cohen Milstein Sellers & Toll PLLC

Suite 800

1100 New York Avenue, NW

Washington, DC 20005

E: cmcglosson@cohenmilstein.com

T. 202-988-3970

Advertising Material. This content is informational in nature and should not be read or interpreted as legal advice. Should you need legal advice, please contact a lawyer.

On September 17, 2025, the U.S. Securities and Exchange Commission (SEC) issued a “policy statement” endorsing the inclusion of forced arbitration provisions in initial public offering (IPO) registration statements.

Issued with just one week of public notice, with no opportunity to comment, and without any analysis of the impact of such a “policy” change on either investors or the public markets, the move reverses the Agency’s decades[1]long opposition to such clauses. Though touted by SEC Chairman Paul Atkins as part of his plan to “make IPOs great again,” this dramatic policy shift overlooks the significant costs that forced arbitration imposes not only on investors, but also on the companies it purports to benefit.

The harm to investors is clear. Forced arbitration strips them of the well-established right to pursue class-wide recovery in court. Without the class action mechanism, only the wealthiest shareholders will have the resources to bring claims, leaving retail investors without any recompense when companies engage in fraud. Further, because arbitration is confidential and non-public, the deterrent effect of such litigation will evaporate, likely leading to more fraud.

But smaller investors aren’t the only ones at risk. Fragmenting singular class actions into multiple individual arbitrations will also burden companies with duplicative claims from deep-pocketed, sophisticated investors. Litigating identical allegations across dozens, if not hundreds, of separate arbitrations will significantly inflate legal costs and risks by increasing the likelihood of adverse outcomes, compelling company officers and executives to be deposed in each separate arbitration, and driving up directors’ and officers’ insurance premiums. Companies will also lose key protections available under the Private Securities Litigation Reform Act (PSLRA) and the Federal Rules of Civil Procedure, such as heightened pleading standards and discovery stays during motions to dismiss. Moreover, early adopters of forced arbitration provisions will face an onslaught of litigation challenging the constitutionality and viability of such provisions under both federal and state law.

The structure of private arbitration adds further risk for both sets of stakeholders. Arbitrators are not bound by precedent, and decisions are not published, thereby depriving investors and companies alike of guidance on what conduct is permissible. And without a guaranteed right to appeal, parties have few avenues for recourse if an arbitrator issues a ruling untethered to law.

Both investors and issuers have recognized these risks. In recent years, shareholders and corporations alike have opposed adding forced arbitration clauses to corporate bylaws. In 2018, pharmaceuticals giant Johnson & Johnson sought an SEC no-action letter to exclude a shareholder proposal mandating arbitration for securities fraud claims. The SEC granted such relief, agreeing the provision would violate both federal law and New Jersey state law. More recently, 97.5% of Intuit shareholders— including all major asset managers—voted against a similar proposal.

Ultimately, forced arbitration undermines the integrity of U.S. public markets as a whole. These markets have long attracted investors by operating under a disclosure-based regime that provides material information and a path for redress in cases of fraud. If investors are unable to vindicate their rights, they will exit the market, eroding investor confidence and, in turn, company valuations.

Even as the government shutdown stalls work in Washington, D.C., the Equal Employment Opportunity Commission is taking additional steps to undermine its mission.

The primary federal agency charged by Congress with enforcing the federal employment discrimination laws recently made it easier for employers to discriminate against workers, according to a new internal memo, reported but not yet publicly released.

Since 1971, federal law prohibiting employment discrimination (as interpreted by the Supreme Court) has required employers to use hiring practices which accurately measure job applicants’ ability to do the job. This is to avoid barring people from jobs because of irrelevant characteristics such as their race or gender, even if such exclusion was not intended. 

Referred to as the “disparate impact” rule, it enables workers to challenge employment practices that disproportionately exclude groups of people based on race, gender, or other protected, non-job-related characteristics, where those are not valid measures of who can do the job.

In short, it means that arbitrary hurdles for job applicants have historically been eliminated, and when they haven’t, workers have been able to bring a discrimination claim. That means the job market has a more level playing field for everyone.

For example, let’s say a job posting for a retail or entry-level administrative job requires job applicants to have a college degree. That college degree is likely not necessary to do the job, but workers without one are disproportionately denied the opportunity to be considered. Such workers would have the ability to bring a disparate impact claim against that company.

It’s not just about hiring. Employers who set pay for a position based on what people earned in their prior job — not on the value of the work being done — can also face disparate impact claims and be required to show that prior pay accurately differentiates the value of employees’ current work.

In an era where evidence of intentional discrimination is rarely shown, and employers incorporate increasingly advanced technology in decision making, disparate impact claims are more critical than ever to fight employment discrimination. 

Employers are now frequently using AI to screen applicants, but AI tools may be modeled off the demographics of existing employees, and identify characteristics that are not job-related, like whether you played lacrosse in college.

AI hiring systems may even be a “black box” that does not identify to the employer what criteria it is using. The efficiency gained by using AI must not come at the expense of applicants receiving a fair evaluation on job-related criteria.

Nonetheless, the EEOC has recently begun rejecting all pending claims of disparate impact discrimination, without completing ongoing investigations. Just last month, a leaked internal memo revealed orders to EEOC staff to conclude all investigations into disparate impact claims by the end of September and to notify claimants by the end of October that they must file a lawsuit on their own if they want to continue pursuing their claims.

In doing this, the EEOC is failing to enforce the law that Congress enacted in 1964, which has forbidden employment practices having a disparate impact since at least 1971. There has been no notice posted on the EEOC website or any other form of communication explaining the EEOC’s about face. Instead, the EEOC is leaving those who filed charges to think that it found their claims had no merit.

Fortunately, these civil rights laws can also be enforced by lawyers in the private bar. As the Supreme Court recognized, the nation must rely in part on lawyers acting as a “‘private attorney general,’ vindicating [civil rights laws] that Congress considered of the highest priority.” 

Workers who receive notices of a right to sue should know that the EEOC’s refusal to investigate their claims does not necessarily mean that their claims lack merit or that there is no way forward. To the contrary: The courts are still enforcing the law, including the disparate impact rule. Courts are obliged to do so, as Congress enacted legislation in 1991 that specifically incorporated disparate impact as a form of prohibited employment discrimination. 

But those workers who receive these notices from the EEOC will only have 90 days to file their own lawsuits, or else their claims may be forever time-barred. They should consult a lawyer as soon as possible with experience bringing disparate impact claims.

The EEOC may be abandoning decades of precedent, but the doors to courthouses remain open to workers with disparate impact claims. Do not be deterred by the EEOC’s action or its inaction. If you believe you have been the victim of a discriminatory practice in the workplace, even as a job applicant, there is still a path to justice.

Artificial Intelligence (AI) is transforming the way companies work by streamlining healthcare, automating financial services, and reshaping industries at a pace unlike anything we’ve ever seen. With rapid growth comes risk: some businesses may be tempted to exploit the complexity and novelty of AI to mislead regulators, harm investors, overstate capabilities, or defraud government programs. Take for example Rimar Capital USA, Delphia (USA) Inc. and Global Predictions, all of whom have incurred substantial monetary penalties for false and misleading statements about their purported use of AI.

AI Is Fueling New Fraud Schemes

Fraud tied to AI can take many forms. Here are a few hypothetical examples:

Healthcare & Insurance

• Scheme: Inflate bills for “AI-powered” diagnostics, imaging tools, or predictive analytics that are either unproven, don’t function as described, or replicate existing manual processes.
• Example: A company markets an AI system that claims to detect early-stage cancers with 95% accuracy, but in practice it performs no better than standard methods. Insurers and patients are billed at a premium.

Government Contracts

• Scheme: Overstate capabilities of AI to win defense, intelligence, or administrative contracts. They may claim autonomous decision-making, real-time data analysis, or superior predictive accuracy that does not exist.
• Example: A defense contractor exaggerates that its AI surveillance tool can detect threats with near-perfect accuracy, leading to a multimillion-dollar contract award. Later, the system produces error-prone results.

Financial Services & Technology

• Scheme: Misrepresent the use of AI to investors, regulators, or customers to inflate valuations, justify price increases, or secure venture capital.
• Example: A fintech firm touts an “AI-driven risk model” for loans, but the model is a basic regression analysis with human overrides. Investors are misled about technological edge and growth potential.

Data Misuse & Compliance Fraud

• Scheme: Cut corners on compliance, bias testing, or data privacy, while telling regulators and customers its AI tools are ethical, fair, and privacy-reserving.
• Example: A social media company claims its recommendation algorithm is “bias-free” and compliant, but internal audits show it systematically favors certain content and collects unauthorized personal data.

Cross-Cutting Themes

While these sector-specific examples highlight different forms of AI-related fraud, they are not isolated. Common threads run across industries:

• AI as a Buzzword: Just as “blockchain” and “crypto” were misused in past fraud waves, “AI” is being deployed as a hype-driven label to lure capital, contracts, and credibility.
• Enforcement Lag: Regulators are still developing AI-specific frameworks, creating opportunities for misrepresentation before oversight catches up.

Have You Witnessed AI-Related Misconduct?

If you have non-public information about AI-related misconduct or know of false statements made to the marketplace or government about AI products or services, your information may form the basis of a whistleblower case. Federal and state whistleblower programs and laws, including the False Claims Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, offer protections for those who come forward, and in certain circumstances, financial awards for exposing fraud.

Why act now? Because AI is moving faster than the law. Regulators and courts rely heavily on individuals who have the courage and knowledge to come forward and report wrongdoing. Whistleblowers have been essential in protecting taxpayers, patients, consumers and investors in every major wave of technological change. AI is no different and your knowledge could make all the difference.

The Department of Justice (DOJ) has taken a bold new step in the fight against businesses that conspire with their competitors to drive up the cartel’s profits by suppressing competition with each other—offering potentially substantial financial rewards to individuals who provide information that leads to the successful prosecution of criminal antitrust violations. The new Antitrust Whistleblower Rewards Program reflects a growing recognition that individuals, rather than corporations, very often hold the keys to uncovering price-fixing, bid-rigging, and market-allocation schemes.

In this Q&A, Daniel McCuaig, a former DOJ Antitrust Division civil and criminal trial attorney, and Raymond Sarola, who represents whistleblowers in a wide range of matters before the DOJ and other federal agencies, discuss this new program and the substantial incentives it presents for people with nonpublic information who report it to the government.

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Q:  What is the DOJ Antitrust Whistleblower Rewards Program?

Dan:  In May of this year, the DOJ’s Antitrust Division established a new program that uses significant financial incentives to encourage individuals to come forward with specific information about criminal violations of the federal antitrust laws. The Antitrust Division has long relied on its leniency program to generate the bulk of its successful criminal prosecutions by offering amnesty to cartel members that turn state’s evidence on a conspiracy of which the government was previously unaware. The program creates strong incentives for corporations to turn on their cartels and has been wildly successful for decades. But, for a number of complicated reasons, it’s been less effective lately. This new whistleblower program is designed to pick up the slack by appealing directly to individuals rather than corporations, by paying substantial financial awards to eligible whistleblowers who comply with the rules of the program.

Q:  Who can be a whistleblower under this program?

Ray:  Individuals who voluntarily provide original information to the Antitrust Division about “Eligible Criminal Violations” may be eligible to receive whistleblower awards. To constitute “original information,” a whistleblower’s information must come from their personal knowledge or analysis (not solely from public facts) and must not already be known to the government. And to be eligible for an award, the whistleblower’s information must lead to a resolution that includes a criminal fine (or related criminal recovery) of at least $1 million.  Notably, a whistleblower does not have to be a corporate “insider.” Whistleblowers can be competitors or even industry experts whose independent analysis generates information that supports a finding of a criminal violation.

Q:  What counts as an Eligible Criminal Violation?

Dan:  Anything that the Antitrust Division prosecutes criminally can be an Eligible Criminal Violation. Most of the time, that means “horizontal” agreements between competitors to fix prices, rig bids, or split up markets among them—whether by product, by territory, or customer. 

Eligible Criminal Violations also include certain other Sherman Act violations and federal criminal violations relating to government procurement or affecting the conduct of federal competition investigations.

Q:  What is the difference between a civil violation of the antitrust laws and a criminal one?

Dan:  Because the Antitrust Division has discretion when it comes to enforcing the antitrust laws criminally or civilly, it will be important for whistleblowers and their counsel to understand the distinctions the Division draws when exercising that discretion, and to present to the government information that supports criminal enforcement. Even price-fixing, bid-rigging, and market-allocation violations are regularly challenged civilly when they appear to incorporate novel characteristics or when the government otherwise is skeptical of its ability to clear the “beyond reasonable doubt” bar to obtain a criminal conviction. Because the Division’s civil enforcement actions are almost always tried before judges whereas its criminal prosecutions are tried before juries, understanding (and including in presentations to the government) contextual facts that increase the jury appeal of a case—even if not technical elements of the offense to be proved—can tip the balance to criminal enforcement.  

Q:  Are government employees eligible to be whistleblowers? 

Ray:  Certain government employees are excluded from this program, including those who are employed by the DOJ or other law enforcement agencies, or are a close family member of such a person. This exclusion is designed to bar federal employees or contractors whose job it is to identify or report fraud but should not bar other government employees whose job is unrelated to law enforcement.

Q:  What if a whistleblower participated in the illegal activity? 

Dan:  A whistleblower who participated in the illegal activity may still be eligible to participate in this program. As with the Antitrust Division’s leniency program, the only individuals who are excluded are those who were clearly the leader or originator of the illegal activity or who coerced another party to participate in that activity. This exclusion does not bar employees of a company who were only following orders from being eligible whistleblowers, or even the price-fixers themselves—as long as they were just participants in the cartel and not its originators, leaders, or arm-twisters.

Q:  How is the whistleblower award calculated?

Ray:  The Antitrust Division has discretion to determine the amount of awards and has published a list of factors it will consider in setting those awards, which are between a presumptive minimum of 15% and a maximum of 30% of the recovered criminal fine. These factors generally relate to how helpful the information and other assistance provided by whistleblowers and their counsel were to the enforcement action and recovery. They are similar to the factors used by the government in determining awards under the False Claims Act and other agency whistleblower programs.

Q:  Can a whistleblower submit information to the Antitrust Division anonymously?

Ray:  Whistleblowers who are represented by counsel are permitted to contact the Antitrust Division anonymously through their attorney. This path is also provided by the SEC’s whistleblower program, and our clients have proceeded in this manner where appropriate.

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About the Authors

Daniel McCuaig (admitted in DC), a partner in Cohen Milstein’s Antitrust practice, was a trial attorney in the Antitrust Division of the U.S. Department of Justice for more than a decade. There, he led investigation and litigation teams in both criminal and civil matters related to price-fixing, bid-rigging, and other antitrust law violations. He joined Cohen Milstein in 2019 and has continued to challenge anticompetitive conduct across a broad range of industries.

Raymond Sarola (admitted in NY and PA), a partner in Cohen Milstein’s Whistleblower practice, represents whistleblowers in high stakes matters under all major federal and state whistleblower programs. He has extensive experience bringing False Claims Act lawsuits and working closely with federal prosecutors in Main Justice and across the country. 

Attorney Advertising Material. Any endorsement in this advertisement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. Prior results do not guarantee a similar outcome.

* Note:  These FAQs are presented as general background on the DOJ Antitrust Whistleblower Program.  Additional laws and rules may apply to any particular case. 

This past June, the U.S. Supreme Court, in an 8-1 decision, dismissed the writ of certiorari as improvidently granted (colloquially know as a “DIG”) in an appeal brought by Labcorp Holdings, Inc.

The diagnostics company had asked the Court to review the Ninth Circuit’s decision affirming class certification in a disability discrimination class action, arguing that federal courts were improperly certifying classes that included uninjured members.

Friend of the Court

Among the pleadings distributed to the Justices before the Supreme Court issued its rejection were nine amicus curae briefs, including one that expressly addressed whether the Court should consider the case or if the Court (and the rule of law) would be better served to DIG it. This 29-page brief was submitted by federal jurisdiction scholars, whose expertise include Supreme Court jurisdiction and procedure. Cohen Milstein’s Alison Deich, an antitrust partner and former law clerk for the DC Circuit, led the amicus team.

In high-stakes cases like Labcorp and recent securities class actions NVIDIA v. Fonder AB and Facebook v. Amalgamated Bank, amicus curiae briefs are critical advocacy tools. Amicus curiae, or “friend of the court” briefs, allow non-parties to provide legal arguments or policy perspectives to assist the Court in its analysis and decision-making on important questions.

Labcorp had the potential to make it significantly difficult for investors, workers, consumers, and other injured parties to bring class actions. Given the far-reaching significance of the question before the Court, advocates recognized that the Court declining to rule in the case might be the best route to preserve plaintiffs’ rights. Deich identified a path to that result—zeroing in on a detail in the respondents’ brief that Labcorp only appealed one of the two class certification orders that had been issued.

“We did not want the Court to decide a question with such far-reaching implications when it was unclear that it had jurisdiction to do so,” said Deich.

In the amicus brief by legal scholars, her team explained how Labcorp’s decision to appeal just one of the two class certification orders created a tangle of jurisdictional, prudential, and factual problems that justified a DIG. Those problems became the focus of the Court’s attention at oral argument—and resulted in a DIG that preserved important aspects of the legal status quo.

Highlighting Unheard Perspectives

“What Ali and her team did in Labcorp is emblematic of the firm’s amicus practice,” said Laura Posner, a partner in Cohen Milstein’s Securities Litigation & Investor Protection practice group. Posner shepherds the firm’s amicus work in securities class actions and has spearheaded more than a dozen Supreme Court amicus briefs, including several on behalf of the North American Securities Administrators Association—the association of all state securities regulators in the United States—and former SEC officials.

“The Court has limited capacity to analyze all the facets of a case. So, amicus briefs play a uniquely important role, providing a deeper analysis or broader perspective beyond those advanced by the parties.”

Posner, who is also the president of the Institute for Law & Economic Policy, an investor protection public policy think tank, noted that amicus briefs in securities class actions are especially potent. Such briefs often provide economic data, industry insight, policy arguments, or legal analysis from experts and scholars in those fields that inform the Court of a case’s stakes and practical implications. Further, they allow interested parties, such as institutional investors, economists, and former members of the Securities Exchange Commission, to share their points of view in cases that may not directly involve them but could nonetheless reshape the rules governing investor rights, market conduct, and corporate disclosures.

“Amicus briefs offer practical benefits for both institutional investors and the courts,” noted Posner. For example, had NVIDIA or Facebook not been DIG’d by the Court, both could have significantly weakened securities laws and undermined investors’ ability to hold corporations accountable for fraud. In NVIDIA, potentially the most damaging case, Posner led an amicus team of distinguished scholars of economics, accounting, and other data sciences in support of the respondent in this case that, among other things, sought to undermine investors’ ability to use experts at the pleading stage.

Even in cases where the Supreme Court does not rule in investors’ favor, amicus briefs can play a critical role.  For example, in Slack v. Pirani, distinguished legal and economic scholars represented by Cohen Milstein and Professors John C. Coffee Jr. and Joshua Mitts from Columbia Law School submitted a brief demonstrating how tracing under the Securities Act of 1933 was possible, helping guide the Court to a narrow, fact-specific result that would have limited impact, Posner said.

“Similarly, in Goldman Sachs v. Arkansas Teacher Retirement System, we submitted a brief that was successful in emphasizing how generic corporate statements, even if vague, can have material price impacts when later revealed to be false.”

Not all institutional investor amicus briefs are focused on securities class actions. This past November Molly Bowen, also a partner in the firm’s Securities Litigation & Investor Protection practice group, filed amicus briefs in two federal circuits supporting a federal regulation involving an employment issue that signatories believed impacted fair competition and the open markets. Amici, including the California Public Employees’ Retirement System, California State Teachers’ Retirement System, and Comptroller of the City of New York, argued that human capital management impacted long-term value of investments and that a uniform, national approach through regulation was superior to individual adjudication of the issue.

A Pragmatic Strategy

Institutional investors are critical amicus signatories. These institutions—and the public employees, teachers, firefighters, police officers they represent—are impacted the most by securities fraud and unfair markets. Courts have recognized their ability to lead securities fraud lawsuits with care and to ensure the best result for the class. Facebook, Nvidia, and Goldman, for instance, were all led by institutional investors.

“It’s important for the Court to see the name of institutional investors on these briefs and the trillions of dollars in assets under management they represent in the markets,” Posner said. “I firmly believe we have survived a series of existential crises at the Supreme Court because we have been able to convince the Court, primarily through amicus briefs, that the narrowing of investor rights will have dire consequences on institutional investors and the markets in which they invest.”

Amicus participation offers fiduciaries acting in the best interests of their plan beneficiaries another way to protect the integrity and transparency of financial markets, with a very limited expenditure of time or resources.

Moreover, by publicizing their positions on key legal issues, institutional investors can help build consensus and a normative vision within the investment community about the values and principles that should guide investor rights.

Cases on the Radar

Cohen Milstein’s amicus practice is interdisciplinary and takes a broad interest in cases that may impact our clients’ interests or that matter to the broader landscape of fair markets and the rule of law.

Currently, Posner is watching BDO USA v. New England Carpenters Guaranteed Annuity and Pension Funds, which addresses whether clean audit reports are material to investors. “If the Court reverses the Second Circuit, I think it would be devastating to investors,” she said. If the Supreme Court does grant cert, she believes it would provide a good opportunity for investors to sign on to an amicus brief. 

In the enchanted world of employee benefits, one question looms large: when it comes to disputes under the Employee Retirement Income Security Act (ERISA), is arbitration the Wizard with all the answers? While ERISA claims are indeed arbitrable as a general matter, a growing number of circuit courts have ruled that arbitration clauses cannot overreach and extinguish substantive remedies. Several plan sponsors have tried to add arbitration clauses that waive plan-wide remedies, but courts have found them to constitute prospective waivers of participants’ statutory rights, rendering them unenforceable under the “effective vindication” doctrine.

Dear Old Federal Arbitration Act

Arbitration clauses are provisions in contracts that require parties to resolve their disputes outside of court, through private arbitration. The Federal Arbitration Act (FAA) was enacted to overcome a perception of judicial hostility towards arbitration agreements and to promote arbitration as a quicker, less expensive method for resolving disputes. Under the FAA, a written agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA is thus “a congressional declaration of a liberal policy favoring arbitration agreements.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).

At first glance, then, it would seem an agreement to arbitrate is the end of the yellow brick road. But as any ERISA traveler knows, the path is rarely so simple.

What Is This Effective Vindication Doctrine?

An arbitration clause may be able to dictate the forum and manner in which disputes are resolved, but it cannot “alter or abridge substantive rights.” Viking River Cruises v. Moriana, 596 U.S. 639, 653 (2022). Put another way, an arbitration clause cannot operate as a “prospective waiver of a party’s right to pursue statutory remedies.” American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 235 (2013). This is known as the “effective vindication” doctrine: courts will invalidate arbitration provisions that prevent parties from effectively vindicating their substantive rights or remedies under a statute.

The effective vindication doctrine is often implicated in ERISA cases because some plan sponsors have included mandatory arbitration provisions in their plans to try to avoid class action litigation. However—while courts have agreed that ERISA claims are generally arbitrable—the attempt to avoid class action litigation has not been a magical Oz outcome. The perhaps innocent attempt to waive class remedies has proven to be fraught with problems. See, e.g., Fleming v. Kellogg Co., 2024 WL 4534677, *5-6 (6th Cir. Oct. 21, 2024); Smith v. Board of Directors of Triad Manufacturing, Inc., 13 F.4th 613, 621-22 (7th Cir. 2021).

The key question, then, is whether arbitration provisions that attempt to prevent class actions are impermissible…

Is your company offering an Employee Stock Ownership Plan, or “ESOP”? ESOP stock can be a valuable benefit. But like any investment, it comes with both advantages and potential risks. At first glance, it may seem like there’s no downside to receiving company stock in exchange for years of service. But ESOPs differ from other retirement plans, such as 401(k) plans, which usually offer a diversified menu of investment options; or defined-benefit pensions, where you are guaranteed a fixed monthly retirement check for the rest of your life. ESOP stock carries unique considerations employees should understand. Here are three key points to keep in mind:

1. ESOP shares are not “gifts” from your employer.

It’s a common misconception that stock contributions to your ESOP account are simply a gift—something employees should accept without question. In reality, ESOP contributions are a form of compensation, not charity. When your employer contributes stock to your ESOP account, it is doing so in place of other forms of pay or benefits. In fact, your employer receives tax deductions for ESOP contributions precisely because the IRS views ESOP contributions as part of employee compensation.

2. Your ESOP investment may carry more risk than other investment options.

ESOPs for non-publicly traded companies invest in private employer stock, which is not traded on an open market. This can create significant investment risk. If a valuation is flawed or the company faces financial trouble, the value of company stock—and therefore the value of your ESOP account—can decrease. On top of that, employees’ livelihoods are already tied to their employer, which means a downturn could hit both your job and your retirement account at once.

3. ESOP shares are sometimes overvalued or inflated at the time of contribution.

The value of ESOP shares is determined at the time the ESOP purchases the company and then reassessed annually. But the valuation of private company stock is complex and depends on factors like:

• Whether the ESOP received a controlling interest in the company.
• Whether the shares are marketable (can be sold or liquidated).
• Whether the financial information and projections used to value the company were realistic and unbiased.

For instance, employees may technically “own” 100% of company shares but they often lack key shareholder rights such as electing the board. If a valuation doesn’t properly account for lack of control, limited marketability, or other factors, employees may end up overpaying for company stock. Yet most employees receive little to no information about how these valuations are conducted, leaving uncertainty about whether their retirement savings reflect fair value.

Bottom Line: ESOP stock is not a gift—it is compensation employees earn through years of service with a company. That’s why federal law (ERISA) requires that the stock allocated to your ESOP account was based on fair market value. Both current or former employees (with vested ESOP stock) have the right to ensure their stock was fairly valued during the initial ESOP transaction and to protect themselves from being short-changed on their hard-earned retirement benefits.

Accounting fraud is surprisingly prevalent. Often synonymous with financial fraud — think of Sam Bankman-Fried’s involvement in the collapse of FTX or the demise of Enron in 2001 — recent studies indicate that up to 41% of companies engage in accounting violations each year.

Despite robust regulatory and enforcement programs championed by the U.S. Securities and Exchange Commission (SEC), each year accounting fraud results in investor harm, financial losses, and negative market impacts.

Accounting fraud occurs when a company or individual deliberately misrepresents information to gain money or avoid financial loss. Accounting fraud creates a false picture of a company’s health to deceive investors, regulators, and others.

How it happens is more obvious than you’d think.

Spotting the Warning Signs of Accounting Fraud

Red flags that often indicate accounting fraud may be occurring include:

• Significant pressure from supervisors to meet earnings and other performance expectations,
• Supervisory focus on short term performance rather than long term company outlook, for example, pressure to do “whatever it takes” with the numbers to make this quarter look outstanding,
• Financial reporting and accounting infrastructure that lags behind the growth of the company, and
• Management’s poor “tone at the top,” with excessive focus on the firm’s financial performance, to the detriment of quality of work, and employee support and development.

The Most Common Forms of Accounting Fraud

Accounting fraud can take many forms, but most schemes fall into a few well-recognized categories that share a common goal: to distort a company’s true financial picture for personal or corporate gain. These categories include:

• Falsifying revenue, that is, falsifying the financials to make it look like the company earned more than it did,
• Concealing debts or risks that should be included in the financials to make the company look healthier than it is,
• Improper accounting, meaning ignoring accounting rules to boost stock prices, and
• Omitting critical facts or outright lying in SEC filings, earnings calls, or press releases that result in misleading investors or even causing investor harm.

How does this hurt you and me? Lies or omissions affect real people—employees whose retirement savings are tied up in company stock, pension funds investing on behalf of government employees or other public servants, or everyday investors trying to build a future.

The Role of the Whistleblower

Officers, directors, auditors, accountants, vendors, and others with knowledge of accounting fraud can curtail and stamp it out. This is where whistleblowers play a critical role. Tips about accounting violations have not only triggered investigations by the SEC but have also led to substantial whistleblower awards. In cases where the information provided by the whistleblower results in a successful SEC enforcement action and monetary sanctions collected of more than $1 million, the whistleblower can be eligible for an award under the SEC Whistleblower Program. Whistleblowers who possess actual knowledge of the securities fraud and come forward to report that information to the SEC enable the agency to quickly detect and halt accounting fraud.

Importantly, the SEC has stated that accounting fraud cases are a priority for the Division of Enforcement for 2025.

Turning Red Flags into Action

If you work at a company and see signs of accounting fraud, you may be able to help put a stop to it. Whistleblowers are usually insiders who know how the numbers are manipulated or falsified, know who approved the manipulation or falsification, or know how certain risks or liabilities were hidden.

If you see the signs, and you’re ready to act, you should give serious thought to contacting an experienced whistleblower attorney. While you certainly do not need to be an attorney to identify possible accounting fraud at or related to your job, an attorney can help you report your information confidentially, correctly, and carefully. Your voice could be the key to exposing the truth, stopping fraud, and protecting countless others from harm.