AAJ: SEC Should Reject Carlyle's Attack on Investor Rights

WASHINGTON, Feb. 2, 2012 /PRNewswire/ -- The American Association for Justice (AAJ) today called on the U.S. Securities and Exchange Commission (SEC) to reject The Carlyle Group's attempt to gut investors' legal rights as part of their initial public offering.  The private equity buyout firm revised its registration statement earlier this month, adding a forced arbitration clause that would strip investors of their ability to hold Carlyle publicly accountable for fraud, misconduct, or negligence in a court of law.

"Carlyle's blatant attempt to skirt accountability runs counter to the SEC's mission of protecting and advocating for the rights of investors," said AAJ President Gary M. Paul.  "The SEC should maintain its decades-long stance against the inclusion of forced arbitration and reject Carlyle's predatory maneuver to circumvent well-established securities law and force investors into a rigged and biased process."

The SEC has the authority to deny Carlyle's use of forced arbitration in its proposed IPO; for example, the SEC blocked a 1990 IPO by a Philadelphia savings and loan company that attempted to include such a clause in its corporate charter.

Additionally, lawmakers, academics, and former SEC officials have all spoken out against Carlyle's attempt to gut investors' rights.  Even Carlyle senior adviser and former SEC Chairman Arthur Levitt told Bloomberg that forced arbitration "clearly" denies investors' rights and that "companies that consider going down this road take a perceptual risk which, in terms of an IPO, is probably not a risk worth taking."

SEC approval of forced arbitration within Carlyle's IPO would open the door for other companies to evade securities law by inserting similar clauses into their governing documents.

"The SEC must protect Americans from corporate abuse and misconduct by standing up for investors and saying enough is enough – companies that commit fraud will be held accountable," said Mr. Paul.  "Wall Street bailouts, Enron, and WorldCom provide plenty of evidence that the SEC should not allow any company to grant itself immunity."

Lawmakers, former SEC officials, academics, and other experts have voiced their opposition to Carlyle's attempt to force investors into arbitration.  Learn more here.

As the world's largest trial bar, the American Association for Justice (formerly known as the Association of Trial Lawyers of America) works to make sure people have a fair chance to receive justice through the legal system when they are injured by the negligence or misconduct of others--even when it means taking on the most powerful corporations.  Visit http://www.justice.org.

SOURCE American Association for Justice