CalPERS says SEC rollback of ban on forced arbitration would curb investor class actions

A CalPERS staff member told the California Public Employees' Retirement System board on Oct. 26 that CalPERS sent a letter to the Securities and Exchange Commission opposing the agency's decision to reverse its long-standing policy against forced arbitration.

The staff member said the SEC voted 3-1 to move ahead with the policy change despite CalPERS' letter, and cited reporting by Reuters. "Forced arbitration would block investors from joining together in court to hold companies accountable for securities fraud," the staff member said.

CalPERS argued in the letter and in remarks to the board that private securities class actions recover substantially more for investors than SEC enforcement actions. The staff member said that in 2024 private securities class actions recovered about $2,740,000,000 for investors compared with roughly $345,000,000 distributed from SEC enforcement actions.

"For decades, the SEC has rejected forced arbitration provisions as incompatible with its mandate to protect investors and promote healthy capital markets," the staff member said, adding that rolling back the policy would "tilt the playing field in favor of corporations and away from investors like CalPERS." The speaker noted CalPERS represents more than 2,000,000 members whose retirement security depends on transparent markets.

The remarks recorded at the meeting reflect CalPERS' opposition and its public letter to the SEC; the board member did not propose a formal vote or a board motion on the matter during the remarks. The staff member closed the item by saying CalPERS is "committed to standing up for market practices that protect investors."