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SEC commissioner criticizes mandatory arbitration clauses in IPO filings

Mandatory arbitration clauses should not be included in initial public offering documents, a new appointee to the Securities and Exchange Commission said.

"My pitch to you is that this is not the way to do this. This will undermine confidence in our markets in the long term," said Robert Jackson at the CEO Investor Forum in New York on Feb. 26.

Changing the way shareholder disputes are resolved should be handled through a normal rule-making process, Jackson said. He noted that because the SEC's budget is frozen, shareholder lawsuits represent a necessary adjunct to the agency’s enforcement functions.

Jackson’s views put him at odds with SEC Commissioner Michael Piwowar, a Republican, who has suggested that arbitration clauses could be in keeping with a general rollback of corporate regulation.

Jackson, a Democrat, was recently appointed as an SEC Commissioner by President Donald Trump.