House Endorses SEC's "Neither Admit Nor Deny" Settlements
Earlier this year, we reported a significant change in policy at the Securities and Exchange Commission: companies that admit to criminal charges in securities fraud matters may no longer settle SEC enforcement matters without admitting guilt of the same conduct alleged in the criminal proceedings. The change in tack was criticized by some as a means of undermining the SEC’s long-standing policy of allowing companies, in appropriate circumstances, to settle cases on a “neither admit nor deny” basis – an attractive option for companies seeking to mitigate their exposure or liability in related cases.
When the SEC announced the policy change, John Carney of CNBC penned an article insisting that “the change will have very little impact on most of the cases the SEC brings.” Carney suggested that most companies will continue to settle SEC matters on a “neither admit nor deny” basis, because “[o]nly companies that admit or are convicted in a criminal court will actually be denied those familiar words of settlement blather.”
Indeed, it does not appear “neither admit nor deny” settlements will be going away any time soon.
As Law360 reports, the House Financial Services Committee recently indicated “that they would not force securities and bank regulators to abandon their policy of settling cases without obtaining admissions of guilt despite recent judicial criticism of the no-account deals.” Indeed, “most lawmakers supported the continued use of no-admit, no-deny settlements, saying they view the use of the deals as a practical solution to what would otherwise be an unmanageable litigation load.”
Thus, the SEC’s change in settlement policy will continue to apply only to the minority of cases in which a company pleaded guilty to criminal securities fraud charges. In all other enforcement proceedings, a “neither admit nor deny” settlement remains on the table.