The financial press and blogs were abuzz in late January 2012 about the Securities Act of 1933 (Securities Act) registration statement filed by The Carlyle Group L.P. for its initial public offering. Its limited partnership agreement required all shareholder disputes with the partnership to be resolved by mandatory, binding and confidential arbitration. The provision included a prohibition against shareholders bringing class actions. Much of the discussion that was critical of the provision focused on the elimination of class actions and not on the pros and cons of arbitration as such.

According to published reports, the SEC advised Carlyle that it would not grant an acceleration order permitting the registration statement to become effective unless the arbitration provision was withdrawn. As a practical matter, Carlyle had no means to challenge the Commission and no practical alternative other than to withdraw its arbitration provision, which it did.

I object to the process by which the SEC killed Carlyle’s arbitration provision.

…continue reading: Arbitration Provisions in Corporate Governance Documents