On June 18, the Securities and Exchange Commission (“SEC”) announced that it intends to make companies and individuals admit wrongdoing as a condition of settling civil charges in certain cases, or be forced to fight the charges in court.
This change in policy may have profound implications for companies in some cases. First, there is the reputational risk that a company would have to endure if it admitted in a settlement with the SEC that it committed wrongdoing. Also, such an admission could have harmful consequences in any related private civil lawsuits, where stockholders, customers or competitors could sue the company based on the allegations admitted to in the SEC complaint.
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