January 8, 2026
SEC Chairman Paul Atkins’ bid to curb “frivolous” shareholder complaints signals a new level of hostility toward investors and lawyers typically viewed as the Wall Street cop’s allies, and the effort has struggled to get off the ground as companies are slow to adopt mandatory arbitration clauses for shareholders.
Championed as a way to boost IPO activity, Atkins’ push to funnel claims away from courts and into private arbitration marks a departure from how the 90-year-old Securities and Exchange Commission views its role as a regulator, shareholder lawyers and an investor advocate said.
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The SEC, now run solely by a GOP chairman and commissioners, unveiled its new stance on mandatory arbitration as a “clarifying” policy statement without noting any consideration of public input.
The agency under the second Trump administration has frequently telegraphed its priorities through roundtable discussions instead of going through formal rulemaking. With the arbitration policy, Atkins is taking aim at shareholder litigation despite another safeguard in place to raise the bar for pleading securities fraud class action suits, the 1995 Private Securities Litigation Reform Act.
“Most things that have come out of this SEC, they are solutions in search of a problem,” said Laura Posner, a partner in the securities litigation and investor protection practice at Cohen Milstein Sellers & Toll PLLC. “One of the things that the PSLRA, when it was passed 30 years ago, was actually quite effective at doing was ensuring that frivolous litigation does not move forward past the motion to dismiss stage.”
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Others argue that defending cases as individual arbitration actions would place a considerable burden on companies that choose to go that route, presenting logistical concerns that would otherwise be minimized in a consolidated class action, as well as a potentially larger price tag.
“I don’t think it’s going to save you any money,” Posner said. “Institutional investors will still bring their claim in arbitration, and they’re not going to settle for 10, 15, 20 cents on the dollar. When they bring individual actions, they will be demanding higher percentages of their damages.”
For now, it seems that public companies or those seeking to go public are exercising caution around mandatory arbitration and instead opting to tackle shareholder class actions in court.
“We’ve been talking not only to corporate counsel, but also to issuers directly, to D&O insurers, to underwriters and accountants,” Posner said. “Pretty uniformly, at least from those who are sophisticated, they are advising and being very careful in their recommendations to clients about not proceeding down this road.”
Read SEC War on ‘Frivolous’ Litigation Upends Wall Street Cop’s Role .