Is Policy Shift on the Way for SEC Settlements?


The SEC currently allows investment advisers and other registered entities to resolve enforcement actions without admitting fault. Press releases and SEC orders frequently state that the charged firm or individual “consented to the entry of the settled order without admitting or denying any of the findings.”

It looks as if that is about to change. SEC Chair Mary Jo White recently announced that the agency will require admissions of wrongdoing prior to settling some cases going forward.  Speaking before reporters at a CFP Network conference, she stated,  “There may be particular individuals or institutions where it is very important it be a matter of public record that they acknowledge their wrongdoing, and if not you go to trial.”

The SEC’s neither-admit-nor-deny settlement practice has come under fire in recent years, particularly in the wake of the financial meltdown.  U.S. District Court Judge Jed Rakoff famously refused to sign off on a settlement between Citigroup and the SEC that contained the language and has been a vocal critic of the SEC’s policy.

While a formal policy has not yet been announced, a June 17 email from Co-directors of the Division of Enforcement to SEC staff notes that “there may be certain cases where heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution.”

The email further clarifies that the new requirements would be limited to certain types of cases, including:

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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