SEC Changes Policy on Admissions of Wrongdoing

[Stocks-to-Watch]

The SEC has changed its settlement policy to demand that defendants admit wrongdoing if they’ve already done so in a separate criminal proceeding.

The SEC was harshly criticized by Federal Judge Jed Rakoff* in November for a settlement with Citigroup (C) that did not make Citi admit wrongdoing in a dispute over its sale of mortgage bonds.

“The SEC’s long-standing policy—hallowed by history, but not by reason—of allowing defendants to enter into consent judgments without admitting or denying the underlying allegations, deprives the court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact,” Rakoff wrote.

The change in policy only applies to cases where a defendant was acknowledged wrongdoing in a separate criminal case, so it wouldn’t have applied to the Citi dispute. And SEC Enforcement Chief Robert Khuzami said Rakoff had nothing to do with it and it had been in discussion for months, according to Bloomberg.



Original Article Source by Barrons.com