On Friday, the Securities and Exchange Commission (SEC) said that companies who have already admitted wrongdoing in criminal cases will no longer be able to “neither admit nor deny” their misconduct when settling with the SEC over the same allegations. The SEC claims that this policy change has nothing to do with Judge Jed Rakoff’s recent rejection of its settlement with Citibank, despite the fact that Rakoff criticized the “neither admit nor deny” practice in his decision.
SEC Enforcement Director Robert Khuzami wrote in a statement that “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.”
This language change will hopefully help eliminate the silliness of cases such as that of Bernie Madoff, who famously pleaded guilty to taking part in a multi-billion dollar Ponzi scheme in 2009, but neither admitted nor denied the charges in his settlement with the SEC. However, while the new policy makes the SEC look more flexible, especially in light of the Citibank settlement rejection, since it doesn’t require companies to admit anything they haven’t already owned up to, in practice, little may actually change.