SEC Modifies Neither Admit Nor Deny

Less than two months after Securities and Exchange Commission (SEC) enforcement co‑director Andrew Ceresney told the Corporate Crime Reporter’s Conference that the SEC will be taking a look at modifying its neither admit nor deny settlement policy, the SEC modified its settlement policy.

In a memo to SEC enforcement staff, Ceresney and co‑director George Canellos wrote that “while the no admit/deny language is a powerful tool, there may be situations where we determine that a different approach is appropriate.”

“We currently do not enter no‑admit‑no deny settlements in cases in which the defendant admitted certain facts as part of a guilty plea or other criminal or regulatory agreement,” they wrote.

“Beyond this category of cases, there may be other situations that, after considering the goals set forth above, justify requiring the defendant’s admission of allegations in our complaint or other acknowledgment of the alleged misconduct as part of any settlement.”

“In particular, there may be certain cases where heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution.”

“We have been in discussions with Chair (Mary Jo) White and each of the other Commissioners about the types of cases where requiring admissions could be in the public interest,” Ceresney and Canellos wrote.

“These may include misconduct that harmed large numbers of investors or placed investors or the market at risk of potentially serious harm; where admissions might safeguard against risks posed by the defendant to the investing public, particularly when the defendant engaged in egregious intentional misconduct; or when the defendant engaged in unlawful obstruction of the Commission’s investigative processes.”

“In such cases, should we determine that admissions or other acknowledgment of misconduct are critical, we would require such admissions or acknowledgment, or, if the defendants refuse, litigate the case.”

Ceresney and Canellos said that they “recognize that insisting upon admissions in certain cases could delay the resolution of cases, and that many cases will not fit the criteria for admissions.”

“For these reasons, no‑admit‑no‑deny settlements will continue to serve an important role in our mission and most cases will continue to be resolved on that basis.  We will also continue to strongly defend our discretion to reach such settlements in response to inquiries from courts.”

“We will be holding a Town Hall in the coming days to further solicit and discuss your views. In the meantime, we encourage you to assess each of your ongoing investigations and pending actions with a view to whether the conduct and circumstances warrant consideration of public acceptance of responsibility by the defendant(s).  If you believe admissions may be appropriate, please advise your supervisor and OCC so that we can begin an early dialogue about the case.”

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