The Importance of the 'How' and the 'Why' in SEC Settlements
This article highlights two recent settled actions—'In the Matter of Andeavor' and 'In the Matter of App Annie'—both of which are generally perceived to involve expansive interpretations of the securities laws. Both of these first-of-its-kind settlements also appear to lack detailed discussion of how or why the conduct at issue gave rise to the specific charged violations of the securities laws.
April 01, 2022 at 02:10 PM
8 minute read
White Collar CrimeSettlements are an efficient tool for the SEC and market participants to resolve enforcement investigations without the expense and distraction of litigation for the parties involved. More broadly, settlements also serve as a tool for the SEC to send cautionary signals to the market about evolving regulatory expectations and enforcement priorities. However, the SEC's approach to settlements periodically draws certain criticism of what is described as "regulation by enforcement." Embedded in the "regulation by enforcement" criticism is the notion that the SEC at times seeks to expand regulatory requirements and thus affect market participant behavior through settlements instead of through the proper rulemaking channels (or through judicial adjudication). The SEC itself has long acknowledged its ability to affect market participant behavior through settlements; for instance, as a former SEC Commissioner aptly noted in a 2009 speech, while the "shadow common law" of SEC settlements is not "of the same effect as judicial precedent, settlements … affect not just the parties, but influence the conduct of other companies" and other market participants.
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