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SEC Weighs a Big Gift to Companies: Blocking Investor Lawsuits

  • To spur IPOs, agency is said open to requests to ban lawsuits
  • Businesses want to use arbitration to settle investor disputes
The Securities and Exchange Commission headquarters in Washington, D.C.

The Securities and Exchange Commission headquarters in Washington, D.C.

Photographer: Joshua Roberts/Bloomberg

In its determination to reverse a two-decade slump in U.S. stock listings, a regulator might offer companies an extreme incentive to go public: the ability to bar aggrieved shareholders from suing.

The Securities and Exchange Commission in its long history has never allowed companies to sell shares in initial public offerings while also letting them ban investors from seeking big financial damages through class-action lawsuits. That’s because the agency has considered the right to sue a crucial shareholder protection against fraud and other securities violations.