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.
But as President Donald Trump's pro-business agenda sweeps through Washington, the SEC is laying the groundwork for a possible policy shift, said three people familiar with the matter. The agency, according to two of the people, has privately signaled that it's open to at least considering whether companies should be able to force investors to settle disputes through arbitration, an often closed-door process that can limit the bad publicity and high legal costs triggered by litigation.
A change to the SEC's stance would be the most significant move yet by Chairman Jay Clayton to make going public more appealing, which he's laid out as one of his highest priorities since taking over Wall Street's top regulator last year. It would also hew to the Trump administration's goal of dismantling government policies that it blames for hurting economic growth.
But allowing companies to shield themselves from shareholder lawsuits would almost certainly enrage investor advocates and Democratic lawmakers, a combination that helped defeat a 2012 attempt by private-equity giant Carlyle Group LP to prohibit investor suits as part of its IPO.