Trump SEC Screws Investors with Forced Arbitration

By Martha Perez-Pedemonti and Bartlett Naylor

Investors Screwed by Wall Street Now Have Fewer Avenues of Redress Thanks to Trump’s Wall Street Sycophantic SEC. Instead of constitutional rights guaranteeing access to the courts, abused investors will be forced into a funneled into arbitration kangaroo
court.

On September 17, 2025 the Securities and Exchange Commission (SEC) issued a statement, without public comment or an economic analysis, in response to a Final Rule and Policy Statement issued by the SEC dictating that SEC staff to make the public policy finding of accelerating the effectiveness of a registration statement without considering whether a corporation has forced its shareholders into mandatory arbitration; and amending the SEC’s Rules of Practice stripping SEC Commissioners and third parties of the ability to intervene to challenge public interest findings made by SEC staff pursuant the SEC’s final rule.

SEC Commissioner Caroline Crenshaw, the SEC’s sole genuine investor advocate, called out what could be characterized as a four alarmed fire being kindled at the SEC by the SEC.

First, this Final Rule and Policy Statement directs SEC staff to make public policy statements while ignoring corporations’ use of forced arbitration on investors. Forced arbitration clauses in consumer contracts require people to accept that any future disputes between them and the company must be addressed by an arbitration firm and not heard by a judge in public court.

As applied to investors, forced arbitration clauses force investors out of court and into arbitration forums that are often unfair, opaque, and expensive, often resulting in lower recovery for investors who have suffered fraud or abuse. If the scam is small scale, arbitration isn’t worth it. On a macro-scale, widespread use of forced arbitration clauses lead markets to go under-policed, undermine abusive practice deterrence, obfuscate any existing transparency in enforcement actions against companies, and oppresses investor choice.

As noted by the Supreme Court’s 1987 ruling in Shearson/American Express v. McMahon, 282 U.S. 220 (1987), the inclusion of a forced arbitration provision, in a customer service agreement by a brokerage firm registered with the SEC, violates the anti-fraud provisions SEC laws, “where arbitration is inadequate to protect the substantive rights at issue.” By directing SEC staff to blanketly ignore corporations’ use of forced arbitration on shareholders, the SEC is directing its staff, and forcing its commissioners, to reject two parts of its mandate, to protect investors and to maintain fair orderly and efficient markets, in favor of the third, to facilitate capital formation.

Second, the SEC’s Final Rule and Policy Statement strips SEC Commissioners and third parties, including lawyers and public interest groups, of the ability to challenge SEC staff policy decisions in any meaningful way. Once a registration statement is declared effective, issuers can offer and sell those securities – and contracts forcing investors and shareholders into arbitration will become endemic.

With this decision, the SEC lit a four-alarm-fire for American investors who already face a perilous path down Wall Street.