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S.E.C. Changes Policy on Companies’ Admission of Guilt

January 6, 2012
S.E.C. Changes Policy on Companies’ Admission of Guilt

WASHINGTON — The Securities and Exchange Commission said on Friday that it was making a major change in how it settles some securities fraud cases, telling companies that they will no longer be allowed to neither admit nor deny the commission’s civil charges when, at the same time, they admit to or have been convicted of criminal violations.

The change 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.

Robert Khuzami, the director of enforcement at the S.E.C., said the agency would continue to use the “neither admit nor deny” settlement process when it alone reaches a deal with a company in a case of civil securities law violations. Those types of cases make up a large majority of its settlements.

The S.E.C. has been sharply criticized, in federal court and on Capitol Hill, for allowing companies to repeatedly settle fraud cases without admitting or denying the charges. Until last week, that policy has been applied even when a company acknowledges the same conduct to another government agency, often the Justice Department.

For example, the S.E.C. and the Justice Department announced on the same day last month that Wachovia bank would pay $148 million to settle charges that the bank reaped millions of dollars in profits by rigging bids in the municipal securities market, one of several such settlements announced last year by the two agencies.

This ought to be good for 10s of millions spent by GOP lobbyists to undo this

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