Parties settling with the SEC pursuant to an administrative order have always been mindful of the collateral consequences that such settlements can have on private litigation arising out of the same facts. The impact of SEC enforcement on private litigation in general is significant—civil cases arising out of the same facts as an SEC action typically settle for higher amounts than cases with no corresponding SEC action. Between 2010 and 2019, more than a quarter of securities class action settlements had a corresponding SEC action. Laarni T. Bulan and Laura E. Simmons, Securities Class Action Settlements 2019 Review and Analysis, Cornerstone Research 11 (2020).
When parties reach a settlement and the SEC’s administrative order is publicly issued, private plaintiffs often seek to use the order’s findings against the respondent in various ways. For this reason, respondents in SEC proceedings have often relied on the fact that most settlements expressly do not require the respondent to admit to any of the facts alleged in administrative order. Even after the SEC resolved in 2012 to require more respondents to admit facts in settlements, the vast majority of SEC settlements have not required admissions. Giovanni Patti and Peter Robau, Admissions of Guilt to the SEC under Chair Jay Clayton, NYU School of Law Program on Corp. Compliance and Enf’t, Jan. 19, 2021.