The US Securities and Exchange Commission on Wednesday gave public companies a powerful new tool to curb shareholder lawsuits, as chair Paul Atkins pledged to "make IPOs great again".

The regulator said it will no longer block companies from the public markets if they banned shareholders from filing class-action lawsuits, ripping up a decades-old policy as it seeks to ease compliance requirements and fulfil President Donald Trump's deregulation drive.

The new policy, which allows listed companies to require arbitration of shareholder claims, would move disputes out of the limelight of the court system. Commissioner Hester Peirce, supporting the change, said "the market will do a better job than we can of assessing" their use.

Atkins vowed to make public listings "an attractive proposition for more firms by eliminating compliance requirements that yield no meaningful investment protection, minimising regulatory uncertainty and reducing legal complexity throughout the SEC rule book".

He said the SEC's next steps would include further support for newly public or smaller businesses as well as "expanding post-IPO companies' ability to easily access public markets to raise additional capital". The agency would prepare recommendations on each of these topics, he added.

The moves come as regulators appointed by the Trump administration embrace a more business-friendly stance, rowing back regulation as well as tough enforcement agendas adopted under ex-president Joe Biden.

Democratic lawmakers and investor advocacy groups have sounded the alarm over curbing shareholders' ability to sue companies. Democratic senators Elizabeth Warren and Jack Reed in a letter to the SEC warned it "would be a significant mistake, putting investors and markets at risk".

Shareholder advocates argue this could reduce transparency and tilt the balance of power to corporations in ways that could undermine the perks that have historically drawn investors to the world's biggest capital markets.

A change of policy would not immediately open the floodgates to the use of mandatory arbitration, however. The state of Delaware, where the majority of US public companies are incorporated, specifically bans the use of arbitration for federal securities claims.

But Delaware is also locked in a battle for supremacy with rival states including Texas and Nevada to which an increasing number of companies have moved in recent years.

US-listed companies paid a total of $3.7bn in settlements of securities class- action suits in 2024, according to a tally by Stanford Law School and Cornerstone Research. The number of settlements has ranged from a low of 72 to a high of 105 over the past decade, with the total payouts to shareholders ranging between $1.9bn and $7.4bn.

SEC commissioner Caroline Crenshaw, a Democrat appointee who objected to the new policy, contrasted the sums won by shareholders through class-action suits with the amount returned to harmed investors as a result of the agency's own enforcement actions, which totalled $345mn last year. Some companies could be expected to prefer mandatory arbitration, she said, because they "would rather keep their ill-gotten gains".

SEC allows public companies to block investors from class-action lawsuits