Investor Attorneys Slam SEC Curbing Court Access Over IPO Fraud

A new SEC policy that allows companies to compel arbitration rather than litigation removes a key legal tool holding startups accountable, investor attorneys said.

The Securities and Exchange Commission announced Sept. 17 it will permit clauses in a company’s registration statements that would force investors to resolve claims of fraud and other alleged misstatements through arbitration.

SEC Chairman Paul Atkins called it an initial step to “make IPOs great again,” aimed at “eliminating compliance requirements that yield no meaningful investor protections.”

But the move could effectively preclude some class actions for alleged wrongdoing by these startup companies, the most common—and, ...