WASHINGTON, May 7 (Reuters) - The new head of the U.S. Securities and Exchange Commission defended on Tuesday the agency’s policy of letting firms settle civil charges without admitting or denying them, but also pledged to review the practice.
The practice has come under fire from some federal judges and lawmakers who argue the SEC should insist on an admission of guilt.
The policy leads to “a very good end in many cases where 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,” SEC Chair Mary Jo White said in testimony before a U.S. House appropriations panel.
“Having said that, among the many things I am reviewing as the new chair, is that policy and protocol. I understand the desire for accountability,” she added.
Tuesday marked the first time White has testified before Congress since her March confirmation hearing.
Her comments about the agency’s settlement policy come as the SEC is awaiting a key decision from a federal appeals court in New York over whether to approve a proposed $285 million settlement with Citigroup that U.S. District Judge Jed Rakoff previously rejected.
Rakoff has emerged as one of the most vocal critics of the SEC’s settlement policy. He cited the neither admit nor deny policy as the reason for rejecting it, saying he could not tell if the settlement was truly fair.
Previously, the same judge also turned down a proposed $33 million settlement related to Bank of America’s takeover of Merrill Lynch. He only agreed to sign off on the SEC settlement after the amount was raised to $150 million.
White, talking to reporters after the hearing, declined to elaborate on her review of the settlement policy, but added that it “is a very positive thing that you always want to have in your arsenal”.
The SEC has in the past defended the practice as common among many federal regulatory agencies, but has also sought to make some changes to address the criticism.
In 2011, then-SEC Chair Mary Schapiro called on Congress to pass legislation allowing the agency to impose tougher financial penalties on firms. Schapiro later won some support among a few senators, but the bill never made it into law.
In early 2012, the SEC adjusted its policy to no longer allow defendants to neither admit nor deny charges in cases where they had already admitted to wrongdoing in parallel criminal cases.
But that has not placated all critics.
In February, Massachusetts Democratic Senator Elizabeth Warren questioned the SEC’s practice of routinely settling cases in general, as opposed to taking more big banks to trial.
Her critique of regulators drew some applause in the audience, and a video of her exchange with then-SEC Chair Elisse Walter was widely posted on the Internet.