The Securities and Exchange Commission will begin requiring admission of guilt in certain types of civil settlements, a major departure from the agency’s routine use of a boilerplate clause that allows defendants to pay fines without acknowledging liability.
SEC Chairman Mary Jo White had signaled at a recent hearing that she was reviewing the neither-admit-nor-deny policy, which has been harshly criticized by some judges. On Tuesday, White said some misconduct warrants wringing out an admission.
“We are going to, in certain cases, be seeking admissions going forward,” White said at a Wall Street Journal CFO Network conference. “Public accountability in particular kinds of cases can be quite important, and if you don’t get them, you litigate them.”
In an e-mail sent to the SEC staff earlier this week, the co-directors of the enforcement division said that cases in which the defendant engaged in “egregious intentional misconduct” may justify requiring an admission, as would the obstruction of an SEC investigation or “misconduct that harmed large numbers of investors.” The officials asked the agency’s staff to assess how this thinking might apply to ongoing investigations.