Private-equity firm Carlyle, which is preparing to conduct an initial public offering this spring, announced that it has dropped its controversial plan to require that shareholders settle all disputes through arbitration.
As Compliance Week earlier reported, Carlyle originally included the provision in its Jan. 10 registration statement, part of which mandated that all shareholder disputes be settled through arbitration. Specifically, the provision would have required that all arbitration be brought in an individual capacity; class-action arbitration would be prohibited.
Historically, the Securities and Exchange Commission has disliked the idea of mandatory shareholder arbitration charter provisions, having rejected another IPO offering by a savings and loan company in 1990 after it made a similar request.
The Carlyle case was no exception.
The SEC told Carlyle that it wouldn't approve the IPO as long as the provision was included, according to Christopher Ullman, a spokesman for Carlyle. “After consultations with the SEC, Carlyle investors, and other interested parties, we have decided to withdraw the proposed arbitration provision,” says Ullman.
Ullman adds: “We first offered the provision because we believed that arbitrating claims would be more efficient, cost effective, and beneficial to the firm's shareholders.”