WASHINGTON (AP) -- The chairman of the Securities and Exchange Commission says the agency will start requiring companies and individuals to admit wrongdoing in some big settlements.
Currently, under a longstanding practice, the SEC allows companies and individuals to settle charges without admitting or denying wrongdoing. Critics, including a federal judge, have complained that policy doesn't deter repeat violations.
Mary Jo White says the SEC will now demand admissions of wrongdoing in cases involving serious fraud or harm to investors, and where "it's very important to have that public acknowledgement and accountability." She disclosed the planned policy change Tuesday at a conference organized by The Wall Street Journal.
At the same time, White said the SEC will retain "no admit or deny" for most enforcement cases. She called it an important tool for winning settlements and getting money quickly to investors to compensate them for their losses.
"It will be case by case to some degree," White said.
The "no admit or deny" policy came under scrutiny in settlements the SEC reached with big financial firms, including Citigroup and JPMorgan Chase, for their conduct in sales of mortgage securities in the years leading up to the financial crisis.
Defenders of the policy include White's predecessor, Mary Schapiro. They say that changing the policy could clog courts with cases that are otherwise settled quickly.
The SEC only has civil authority. White noted in her remarks Tuesday that several other federal agencies that wield only civil authority also use "no admit or deny." She acknowledged that some financial firms or executives may not be willing to settle cases if they are forced to admit wrongdoing, requiring the SEC to pursue them in court.
"You always have to be ready to litigate," White told reporters after her remarks.
A memo sent Monday to the agency's enforcement staff from the two co-directors of that division said it may be appropriate to seek admissions of wrongdoing in cases involving damage to large numbers of investors or which placed investors or the market at risk of potentially serious harm.
Cases in which defendants obstructed the SEC's investigation also could qualify, the memo said.
In January 2012, the SEC modified the policy to eliminate "no admit or deny" in settlements in which authorities such as the Justice Department file related criminal charges against a company or individual, and the company or person admits guilt in resolving the criminal charges. Most SEC settlements don't fall into that category.
In November 2011, U.S. District Judge Jed Rakoff struck down a $285 million settlement between the SEC and Citigroup over sales of mortgage securities because he couldn't tell whether the deal was fair. By allowing Citigroup to neither admit nor deny the allegations, Rakoff said, the SEC made it impossible for him to determine if the settlement amount squared with the facts of the case.
In April, another federal judge approved a $602 million payment that would resolve insider-trading allegations against SAC Capital Advisors — the largest insider-trading settlement ever — but he made it conditional pending an appeals court ruling in the Citigroup case.
U.S. District Judge Victor Marrero said the settlement payment is fair, but said he is "troubled" by the idea that CR Intrinsic Investors LLC, a fund affiliated with billionaire Steven Cohen's SAC, and others could make a large payment to resolve the allegations without admitting or denying that they engaged in insider trading
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