Securities and Exchange Commission (SEC) Chairman Mary Jo White signaled that the agency will be making a major policy change by requiring the settling party to make admissions in certain cases. At the Wall Street Journal CFO Conference on June 18, White emphasized that the SEC’s longstanding and broadly-applied “no admit, no deny” settlement model benefits the agency, the public and shareholders by efficiently resolving enforcement matters, and that it will always be a major tool in the SEC’s arsenal. However, White said at the conference, “I have reviewed the policy and the practice, and we are going to in certain cases be seeking admissions going forward. Public accountability in particular kinds of cases can be quite important.”
The new policy troubles the securities defense bar, and with good reason. It would give the SEC considerably more leverage in enforcement actions, for one. And more enforcement actions would lead to litigation. Companies would be far less likely to cough up a fine and sign on the dotted line to quickly put enforcement actions behind them if such agreements yielded public admissions of wrongdoing that could fuel follow-on shareholder suits and even criminal actions.
