Carlyle Group LP abandoned a plan to ban shareholders from filing class-action lawsuits after U.S. regulators threatened to block a stock sale the private-equity firm is seeking to complete as soon as April.
The Washington-based firm amended the documents for its initial public offering on Jan. 10 to include a provision that would have required future stockholders to resolve any claim against Carlyle through arbitration rather than in court. The move provoked controversy among lawmakers and shareholder rights advocates, who urged the U.S. Securities and Exchange Commission not to approve the arbitration clause.
The SEC subsequently told Carlyle that it wouldn’t sign off on the IPO as long as the provision was included, according to a statement the agency issued today. In addition, the proposal was likely to draw opposition from public pensions and agencies, which provided about 40 percent of the capital commitments to Carlyle’s funds as of Sept. 30 and would also have been potential customers for the IPO.
FINRA arbitration is a dispute resolution process offered by the Financial Industry Regulatory Authority (FINRA) for resolving conflicts between investors, brokerage firms, and registered representatives. It serves as an alternative to traditional court litigation, providing a faster and often less costly way to settle disputes. In FINRA arbitration, a neutral arbitrator or panel hears both sides of the issue and makes a binding decision. This process is particularly common in cases involving allegations of securities fraud, breach of fiduciary duty, or other violations of securities laws. Investors and firms generally agree to arbitration in their customer agreements, making it a common method for resolving issues in the securities industry. With a focus on efficiency and finality, FINRA arbitration helps maintain trust and stability in the financial markets.