Carlyle removes class-action clause - FT.com Carlyle, the Washington DC-based private equity group that is set to go public, has bowed to pressure from investors and regulators to remove a legal clause from its listing documents that attempted to limit the ability of shareholders to sue the company. The industry is under intense political scrutiny of its business practices, tax arrangements and the way senior executives have built their fortunes. Rivals to Mitt Romney for the Republican nomination have attacked his record while chief executive of Bain Capital. Carlyle, renowned for its political connections, manages $148bn of investor money and plans to list on Nasdaq. Filings with the Securities and Exchange Commission ahead of the initial public offering had included a clause preventing shareholders from bringing class-action lawsuits against the company in the event of wrongdoing. Instead, they would have to use a confidential arbitration process as individuals. However, the legal strategy provoked opposition from investors and corporate governance activists. On Friday, Senators Al Franken, Richard Blumenthal and Robert Menedez sent a letter to the SEC urging it to oppose the arbitration conditions. "Requiring shareholders to forgo litigation and instead settle disputes in individual, confidential arbitration ... would deprive investors of important congressionally established rights," the letter said. Private arbitration usually prohibits or significantly limits pre-trial discovery - making complex securities claims almost impossible to prove. The letter also said that the prohibition against bringing claims as a class made the hurdles to vindicating shareholder rights "insurmountable." Carlyle said: "After consultations with the SEC, Carlyle investors and other interested parties, we have decided to withdraw the proposed arbitration provision. We first offered the provision because we believed that arbitrating claims would be more efficient, cost effective and beneficial to our unitholders. The California Public Employees" Retirement System, an activist for shareholder rights, owns 5 per cent of Carlyle. However, Carlyle's structure as a trust in which investors will own partnership units, rather than shares in a limited company, means shareholder rights are significantly curtailed. As with other private equity groups that have gone public, such as KKR and Blackstone, shareholders do not have the right to elect board members, or vote on matters such as executive compensation. The three founders of Carlyle, which does not intend to have a compensation committee, shared a pay-out of $413m last year as the company returned about $18bn to investors in its funds. Carlyle is expected to list as soon as market conditions improve. Shares in peer Blackstone have risen by a fifth so far this year.