The recent decision of Securities and Exchange Commission to demand admissions in the settlement of enforcement proceedings on a case-by-case basis could inject significant uncertainty in efforts to resolve SEC actions. This policy could affect the defense of potential or actual criminal actions; shareholder litigation; possible liability of officers and directors; actions by state regulators; and the availability of Directors and Officers Liability Insurance coverage. SEC Chair Mary Jo White recently stated that she welcomed more frequent trials that may result from the SEC’s demand for admissions. Further, the uncertainty concerning when the SEC will demand an admission and the nature of any such admission will increase the difficulty of defending and advising clients. So buckle your seat belt, it is going to be a bumpy ride.
Since the early 1970s, the SEC traditionally permitted a defendant in an action filed in federal court, or a respondent in an administrative proceeding, to enter into a settlement without admitting or denying the allegations in the federal complaint or the order instituting administrative proceedings. The “no admit, no deny” policy had many advantages to the SEC and the settling defendant. The defendant had an incentive to enter into a settlement in order to avoid a trial that might result in an actual finding of liability. The SEC could avoid the expense and risk of trial while still obtaining its regulatory objectives, such as an injunction against further violations of the securities laws; disgorgement of illicit profits; penalties; a bar against continuing in the securities business, appearing before the SEC as an accountant or attorney, or being an officer or director of a public company; and other kinds of remedial relief. Thus, the “no admit, no deny” policy well served the SEC’s needs as a regulatory agency.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
