To Neither Admit Nor Deny – A Tried And True Basis For Settlement In SEC Cases Slowly Slips Away

The Securities and Exchange Commission, SEC, is increasingly receding from its historical position of allowing companies and individuals to settle SEC district court and SEC administrative proceedings on the basis of neither admitting nor denying the Commission’s allegations of wrongdoing. Instead, the SEC, through public pronouncements of its Chairman Mary Jo White, has made clear that the SEC now intends to require admissions of wrongdoing from defendants under certain circumstances.

The new SEC policy will be applied in “cases where … it’s very important to have that public acknowledgement [of wrongdoing] and accountability,” according to Ms. White. While decisions on whether an admission must be made as part of a settlement will be determined on a “case-by-case” basis, Ms. White further indicated that the Commission intends to focus on cases of egregious, intentional conduct or violations that cause widespread harm to the investing public. However, SEC policy is now clear that where a defendant has previously pled guilty in a related, parallel criminal case, he must admit liability in the SEC case in order to settle it.

Making an admission of wrongdoing in an SEC case can have significant, collateral consequences to a defendant. For an individual, there may be the potential concern of criminal liability, and for companies the exposure of related class actions and private litigation.

The SEC needs to be careful with this new approach. Demanding admissions in all SEC cases, or even most, will cause a significant uptick in those SEC defendants and respondents who chose to fight the charges. This, in turn, would likely stretch the SEC’s limited trial and investigatory resources and, ultimately, may impact the SEC’s abilities to initiate and investigate new cases. If the SEC is wise, it will continue to very selectively chose those cases for which it demands admissions to resolve the case, and otherwise keep in place the true and tried “neither admit nor deny” basis for settlement.

If you are under investigation, or being sued by, the Securities and Exchange Commission, or any other securities regulatory body, including FINRA, feel free to contact my law firm for a confidential, no cost consultation on the process, your legal rights and strategic options. Call David Chase, Esq. toll-free at: 800-760-0912 or e-mail at:

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