In testimony to the House Appropriations Committee, recently appointed SEC Chairman Mary Jo White stated that she continues to support the SEC’s practice of settling cases without requiring defendants to admit wrongdoing.
As we reported here at the time, in November 2011 a federal judge refused to sign off on a $285 million settlement agreement with Citigroup because there was not enough evidence to indicate that the deal was fair, reasonable, adequate and in the public interest. Since then, federal judges in Brooklyn, Colorado and Wisconsin have requested more information before signing off on settlements. The Citigroup settlement agreement is currently under review in the Second Circuit in Manhattan, and oral arguments were heard in February.
As recounted last week by Sarah Lynch of Reuters, White defended the “no admit, no deny” policy, testifying that “you essentially get nearly all and perhaps sometimes more of the relief than you get after you’ve litigated …. You get that money to investors very quickly.” Still, White indicated that the policy is among the things under her review as the new chair, and that she understands the need for accountability.
The purpose of White’s testimony before the Appropriations Committee was to ask for more money. The SEC wants a 26% increase in funds from the current level, for a total of $1.67 billion. The money would allow an addition of 676 staff members, including 131 for the enforcement division that polices financial fraud. It would also allow the SEC to carry out its mandates under the 2010 Dodd-Frank Act and the JOBS Act.
As one might expect, some lawmakers were concerned about the budget increase request. In response, White told them that the increase would not come at the expense of taxpayers, because since the SEC’s budget is “deficit neutral” because the costs are offset by fees collected from the financial industry.
We will continue to monitor the Citigroup decision and report back.