On September 17, 2025, the Securities and Exchange Commission (SEC) issued a new policy statement clarifying the effect of mandatory arbitration clauses on its decisions to accelerate the effectiveness of registration statements. In doing so, the SEC confirmed that registration agreements containing mandatory arbitration clauses between issuers and investors will not impact decisions to accelerate the effectiveness of registration statements. The SEC’s formal determination comes after decades of established policy suggesting that registration statements containing mandatory arbitration clauses would not be accelerated in accordance with the Securities Act of 1933.

Under the Securities Act of 1933, a registration statement outlining a proposed public securities offering must be filed with the SEC, and deemed effective, before an issuer can sell securities. The SEC is tasked with reviewing registration statements to ensure complete and adequate disclosures and compliance with federal securities regulations. Although a registration statement generally becomes effective 20 days after filing, an issuer may submit a request for acceleration to have the registration statement declared effective sooner. Prior to the SEC’s recent determination, mandatory issuer-investor arbitration clauses were viewed as limiting investor protections and resulted in denial of acceleration requests. The SEC’s previous approach, and recent shift in position, is set forth by decades of Supreme Court precedent addressing the interplay between the Federal Arbitration Act and federal securities statutes.

Historically, federal securities statutes were viewed as overriding the liberal policy of enforcement of arbitration agreements provided under the Federal Arbitration Act. Federal securities statutes, notably Section 14 of the Securities Act of 1933 and Section 29(a) of the Securities Exchange Act of 1934, contain anti-waiver provisions which void any provision binding a party to waive compliance with securities laws. Although arbitration is not expressly listed within anti-waiver provisions, the applicability of mandatory arbitration provisions was established by the Supreme Court’s decision in Wilko v. Swan, 346 U.S. 427 (1953) (overruled by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989)). The Court, in considering the enforceability of a mandatory arbitration agreement among a brokerage firm and its customers, held that a mandatory provision restricting a party’s right of judicial forum cannot be waived under Section 14 of the Securities Act of 1933. Wilko, 346 U.S. at 434–35. The Court’s decision was rooted in a view that Congress intended to protect investors with the enactment of federal securities statutes, noting “dealers in securities have better opportunities to investigate and appraise the perspective earnings and business plans affecting securities than buyers.” Id. at 435.

Following the Court’s decision in Wilko, the issue of anti-waiver provisions within securities statutes barring the enforceability of mandatory arbitration provisions remained undisturbed until a series of Supreme Court decisions in the late 1980s. In Shearson/American Express, Inc. v. McMahon, 4823 U.S. 220 (1987), the Court considered the enforceability of a mandatory arbitration agreement between a broker and customers under Section 29(a) of the Securities Exchange Act of 1934. The Court concluded that the anti-waiver provisions set forth by Section 29(a), albeit identical to the anti-waiver provisions under Section 14 of the Securities Act of 1933, did not prohibit the enforcement of arbitration agreements. Id. The Court interpreted the scope of “compliance with any provision” within Section 29(a) as only prohibiting the waiver of substantive obligations imposed by the Act, which does not include a statutory duty requiring claims to be resolved in a judicial forum. Id. at 228.

Roughly two years later, the Court reviewed the enforceability of mandatory arbitration agreements under Section 14 of the Securities Act of 1933 in the case of Rodriguez de Quijas v. Shearson/American Express, Inc. 490 U.S. 477 (1989). Continuing its prior analysis from McMahon, the Court determined that the scope of anti-waiver provisions set forth in Section 14 does not encompass procedural or jurisdictional provisions, but only substantive matters. Id. at 481–82. The Court emphasized that its prior decision in Wilko was reflective of a period in which arbitration provisions were viewed with hostility and distrust, which has since been replaced by the “current strong endorsement of the federal statutes favoring [arbitration].” Id. at 480–81.

Based on Supreme Court jurisprudence, the SEC shifted course and expressly concluded that federal securities statutes do not override the Federal Arbitration Act’s liberal policy favoring enforcement of arbitration provisions. The SEC’s policy, providing that mandatory arbitration issuer-investor arbitration agreements will not impact decisions to accelerate registration statements, reflects the current attitude strongly favoring enforceability of the Federal Arbitration Act, absent clear congressional intent to the contrary, along with ongoing deregulatory measures of the current administration.

Moving forward, the SEC will focus solely on the adequacy of disclosures within a registration statement, which includes disclosure of mandatory arbitration provisions. Parties seeking to incorporate mandatory arbitration provisions within registration statements should ensure such provisions are adequately explained in detail and conspicuously listed to guarantee compliance with SEC review. Proper consideration of individual state laws regarding the use of arbitration provisions within corporate contracts remains an important factor, given the potential for conflicting laws on enforceability.