The Curious Case of Carlyle...and Efforts to Shut Down Investor Access to Courts

Presented by

Prof. Barbara Black, Prof. Adam Pritchard, Salvatore Graziano

About this talk

Investor rights and the shareholder franchise in general have been impacted not only by corporate-friendly interpretations of existing law, but also by the direct efforts of companies to limit investors in public companies from exercising their existing rights. Recently there have been several high-profile arguments that companies should insert mandatory arbitration clauses into their corporate charters and registration statements, in order to force investors to arbitrate shareholder claims on an individual basis, and effectively waive their rights to pursue class action claims. This presentation will discuss the legality of this type of arrangement and whether such clauses may violate the federal securities laws. In particular, the presentation will discuss the Carlyle Group IPO, and that company's attempt to insert a provision in its registration statement requiring that all investor claims of any kind be arbitrated on an individual basis in Delaware. The presentation will also discuss the merits and implications of the current litigation between the brokerage company Charles Schwab and FINRA, as Schwab vigorously contests FINRA's disciplinary proceedings initiated in response to Schwab's use of mandatory class action waivers in customer agreements, claiming that the waivers violate FINRA rules.

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