SEC To Be Slightly Less Wimpy About Letting Violators Get Away Without Admitting Guilt

The Securities and Exchange Commission has been taking a lot of heat recently after a federal judge refused to sign off on its $285 million settlement with Citigroup because, as is usual in these types of deals, the bank would neither admit its guilt nor profess innocence, and no evidence was ever entered into the record. But now the SEC says it won’t be letting rulebreakers get off so easily — well, at least not all the time.

Before anyone goes high-fiving the SEC for getting tough, the new rule mostly applies to settlements with parties that have admitted to or been convicted of criminal violations. According to the NY Times, it will also apply to cases where a company enters an agreement with criminal authorities to defer prosecution or to not prosecute as part of a settlement.

The SEC’s standard, “neither admit nor deny” agreement will apply to settlements wherein there are only civil securities law violations, which would include the pending Citigroup settlement.

But the rule change is an improvement, as the SEC had even been allowing companies that had admitted guilt to the Justice Department to get off without having to admit or deny guilt in the civil settlement.

Even though it’s only really come under the heat lamp in recent months, the SEC says it’s been mulling over this rule change since last spring. Of course, during that time period, it’s settled for billions of dollars with banks and other financial institutions that did not have to fess up to wrongdoing.

S.E.C. to Change Policy on Companies’ Admission of Guilt [NY Times]


Edit Your Comment

  1. dolemite says:

    “Your honor…I neither confirm nor deny my innocence in this case of murder, but I’ve written you a check for $50,000.” “I see nothing wrong with this!”

    • Hi_Hello says:

      the only problem is that the check is missing a zero.

      • Loias supports harsher punishments against corporations says:

        Relative to the crime, I’m not so sure. Granted, it’s very difficult to compare murder and financial fraud. It’s not fair to give any death a dollar value. That being said, we as a people have put fine and jail penalties on the books and so thus you can compare it to actual case law and state and federal laws.

        So, is one financial fraud equal to one murder? No, of course not. But some of these cases the SEC brings to court involve hundreds or even thousands of violations – sometimes willful – and that quickly adds up to millions in fines.

        Now, we all here see comments about the need for tort reform, and that class action suits rarely or just meekly benefit the victims. If so, then 50k for a murder does seem to be in line with the real money lost of victims of corporate fraud.

        • Mr. Bill says:

          If someone dies from lack of heat or medical care etc. because they lack money do to fraud then yes it is murder.

  2. TerpBE says:

    I was hoping this story was about college football.

    • Platypi {Redacted} says:

      +1. Stupid SEC.

      • RvLeshrac says:

        Yeah, I mean, I’m totally on board with being substantially more upset about some worthless football bullshit than something which directly affects the health of both our justice and financial systems.

  3. Cor Aquilonis says:

    Oh puh-leeze. The SEC is nothing but a bunch of limp-wristed ninnies that shake down corporate villains for a little extra cash. Now the SEC has decided to escalate from ‘speaking sternly to’ law-breakers to ‘shaking a pointed finger.’ What’s next?

    It’s like watching a three-legged Lhasa Apso bark at the junkyard dogs. Go get ’em, big guy.

    Also, my apologies to limp-wristed persons, for comparing them to the SEC.

    • Gorbachev says:

      More to the point, the financial institutions see SEC settlements as mere costs of business. The potential fees from their fraudulent activities are already factored in before they start their fraudulent activities.

      It’s a joke.

  4. El_Red says:

    It would be easy to punish companies. Criminal charges valid? How long is the sentence was supposed to be for a human? Ok, for the same number of years, ALL profits are gone to the government, aka 100% tax. All companies will start follow the law, to the dot.

    • NoFriggingWay says:

      Genius , but how long do you think it will take for the company to decide to pay off all Debts that year and have Zero Profits? And seriously, it would hurt the Small stock holders more.

      The Company would just pay off those big Loans that are not Due yet, and leave a couple Million Surplus as a Cushion. Then in 3 years when they get their Profits back, they will have paid off all the bills and will have record profits!

      Anything we come up with to hurt them they will find a way around. I say Jail is the only thing that will stop it.

      • wrjohnston91283 says:

        Paying debt isn’t an expense, and thus wouldn’t reduce profit. Sure, they could increase expense during those X years, but simply paying off loans has no immediate impact on the income statement.

        If anything, it would INCREASE profits, as the annual interest expense would be gone.

  5. Fubish says: I don't know anything about it, but it seems to me... says:

    As I understand it, the SEC will be writing some strongly worded letters to financial organizations who continually violate the the rules.

    • pop top says:

      You do not want to receive three of those. Three letters and you’ll receive a citation. Five citations and you’re looking at a violation. Four of those and you’ll receive a verbal warning. Keep it up and you’re looking a written warning. Two of those; that’ll land you in a world of hurt.

  6. dush says:

    What a useless organization. Let’s setup a big regulatory bureacracy then never truly hold anyone accountable.

  7. maruawe says:

    ABOUT time I cannot understand how a company can pay a large fine for doing a wrongful act and not plead guilty– If a regular person in court tried that they would be jailed — maybe that is an answer for corporations also.

  8. oldwiz65 says:

    They will let people off; all that needs to be done is to slip a few fat envelopes to the right people at the SEC. The big banks and wall street know full well the SEC will never really slap them.