Securities and Exchange Commission (“SEC”) Chairman Mary Jo White announced on Tuesday, June 18, 2013, that the Commission will begin requiring admission of guilt in certain types of civil settlements, according to the Washington Post. The announcement comes in the midst of an ongoing controversy that arguably began in 2011, when Judge Jed Rakoff of the U.S. District Court for the Southern District of New York (“SDNY”) rejected a proposed $285 million settlement that the SEC negotiated with Citigroup in which the company would neither admit nor deny wrongdoing.
That “neither admit nor deny wrongdoing” language has formed the basis for countless settlements over the years. However, as White pointed out at Tuesday’s Wall Street Journal CFO Network conference, “Public accountability in particular kinds of cases can be quite important.” Since Judge Rakoff’s stand against the neither-admit-nor-deny language, many oversight and accountability organizations, as well as several other judges throughout the country, have joined him in opposition to allowing companies to settle allegations of serious misdeeds against the public without any admission of wrongdoing. According to the Washington Post, the co-directors of the SEC’s enforcement division told staff earlier this week that cases in which the defendant engaged in “egregious intentional misconduct” may justify requiring an admission, as would the obstruction of an SEC investigation or “misconduct that harmed large numbers of investors.”