SEC to Limit Ability to Settle Without Admission of Wrongdoing
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At a recent Wall Street Journal CFO Network conference [login required], U.S. Securities and Exchange Commission (SEC) Chair Mary Jo White said that, while the ability to settle cases without insisting on an admission of guilt remains an important tool, the SEC plans to “require certain defendants to admit to wrongdoing as a condition of settling securities-fraud charges.” White said that the new policy “would apply to only a select number of cases, and suggested they would have to involve allegations of egregious fraud or significant harm to investors.” The staff will be developing guidance regarding the types of cases that would require admissions of guilt. The SEC has already changed its long-standing practice by precluding defendants from denying guilt when, at the same time, they have admitted to, or have been convicted of, criminal violations in parallel cases brought by the Justice Department.
The SEC’s former long-standing position that allowed defendants in settlements to neither admit nor deny wrongdoing has come under recent scrutiny. For example, in considering the settlement in the Citigroup case in the S.D.N.Y. a few years back, U.S. District Judge Jed S. Rakoff issued a blistering criticism of the practice. In addition, the House Financial Services Committee had indicated at one time that it was planning to hold hearings to examine the practice. Other federal judges have questioned the practice as “counterintuitive.”
Read original articleTags: Mary Jo White, SEC, U.S. Securities and Exchange Commission
