The Securities & Exchange Commission will no longer let companies caught in illegal activity have their cake and eat it, too. The commission’s is ceasing its much-criticized practice of allowing companies that have admitted to wrongdoing in criminal cases of securities fraud to cop a plea saying they “neither admit nor deny” those admitted wrongdoings in a separate SEC fraud case. The new approach applies as well to individuals who find themselves in that situation.
Said SEC Enforcement Director Robert Khuzami in a statement on Friday: “The new policy does not require admissions or adjudications of fact beyond those already made in criminal cases, but eliminates language that may be construed as inconsistent with admissions or findings that have already been made in the criminal cases.”
As The New York Times pointed out, “The commission 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 had been applied even when a company acknowledged the same conduct to another government agency, often the Justice Department..”
Lawyers interviewed by both NYT and The Wall Street Journal seem split on how significant the change is or whether it would have any bearing on SEC enforcement actions. But at least from the perspective of everyday common sense, it sure sounds like a step in the right direction.