In an interview with Politico, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce offered her support to allow companies the ability to prevent investors from banding together in class actions against them if they are victims of securities fraud or abuse. That would mean that investors who were cheated by companies such as Enron and Bank of America would be barred from pressing their claims together, which is a massive deterrence for corporate malfeasance. Public Citizen continues to advocate alone and with coalition partners against actions to force arbitration onto investors.
Forced arbitration is a privatized system of justice that would prevent investors who have been cheated from banding together to seek justice. Not only is forcing investors into arbitration a gross violation of their rights, it is an atrocious way to disempower them from recovering losses against corporate wrongdoers, and removes an important deterrent for corporate fraudsters.
As enforcement agencies under the Trump era continue to slow the pace of enforcement actions against bad actors, the private right of investors to band together is even more important. According to SEC Commissioner Robert Jackson, in the wake of several major securities fraud scandals such as Enron, private investors recovered $19.4 billion in private lawsuits. The SEC recovered just $1.75 billion.
And that’s why senior SEC officials, including Commissioner Jackson and SEC Investor Advocate Rick Fleming, have registered their concerns about any attempt to limit a person’s access to justice through forced arbitration. Even Republican-appointed SEC Chair Jay Clayton has been reticent about stating his support for forced arbitration.
The SEC’s mission is to protect investors. Nothing shows how disconnected Commissioner Peirce is from protecting Main Street than siding with Goliath over every day investors. Commissioner Peirce’s view is out of the mainstream. Public Citizen will continue to fight to protect investors’ access to justice.