WASHINGTON (Reuters) - Securities regulators are going to try to extract admissions of wrongdoing from defendants in some of their settlements, a move that could ultimately force more cases to go to trial, Securities and Exchange Commission Chair Mary Jo White said Tuesday.
The announcement from White marks a departure from the typical practice at the SEC and many other civil federal regulatory agencies of allowing defendants to settle cases without admitting or denying the charges.
That practice has come under scrutiny following the financial crisis, leading some federal judges to challenge or strike down proposed settlements with defendants.
“I have reviewed the policy,” White said at the annual “CFO Network” event hosted in Washington by the Wall Street Journal.
“We are going to in certain cases be seeking admissions going forward. I think ... public accountability in particular kinds of cases can be quite important and if we don’t get them, then we litigate them.”
White’s planned changes to settlement policy come as the SEC is awaiting a critical decision from a New York appeals court after U.S. District Judge Jed Rakoff declined to approve a proposed $285 million settlement with Citigroup Inc over whether the bank misled investors during the financial crisis.
White told reporters on the sidelines of the event that people should not interpret the change as a criticism of the settlement policy and in fact a “majority” of cases will still likely be settled with defendants neither admitting nor denying any wrongdoing.
“This is not a criticism of the past practice and having ‘no admit, no deny’ settlement protocols in your arsenal as a civil enforcement agency ... (is) critically important to maintain,” she said.
She added that cases will need to meet certain criteria in order for the SEC to seek admissions. Those include cases where there was “widespread harm to investors” or “egregious intentional misconduct,” she said.
Rakoff, who has been arguably the most vocal about the SEC’s settlement policy, declined to comment on the changes White announced.
Reporting by Sarah N. Lynch.; Additional reporting by Nate Raymond and Jonathan Stempel in New York. Editing by Andre Grenon