December 8, 2025
After passage of new SEC rule, Zion Oil and Gas requires shareholders to resolve disputes through arbitration
An oil driller that uses biblical verses to guide exploration has become the first company to block class-action shareholder lawsuits under new management-friendly policies approved by US securities regulators.
Zion Oil and Gas, a penny stock that as of September had no revenue from drilling, said in a Securities and Exchange Commission filing last week that it would require shareholders to resolve disputes through arbitration rather than court.
The move comes after the SEC in September announced it would no longer block companies from public markets if they banned shareholders from filing class-action lawsuits. Critics of the change said they worried it would harm corporate disclosures and shareholder rights, putting investors and markets at risk.
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Laura Posner, a partner at law firm Cohen Milstein, said: “I think we’ll see an uptick of fraud because companies won’t face the public onslaught that could occur when they are caught engaging in malfeasance.”
Posner said most companies are unlikely to adopt these provisions, but those with higher risk profiles may take advantage of them.
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Posner said: “Not only do you have companies and their counsel advising that these proposals are not in their best interest, but you have every asset manager, investment adviser and large institutional investor saying these are not good for the company.”
Read Faith-Based Oil driller Is First US Company to Block Investor Class-Action Lawsuits.