November 7, 2025
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 both 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.