Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Tuesday, November 26, 2013

SEC Chairman Mary Jo White Welcomes More Trials

One policy change new chairman Mary Jo White has brought to the Securities and Exchange Commission (“SEC”) requires some defendants to admit to wrongdoing if they wish to settle with the agency. It has long been the SEC’s policy in enforcement cases to try to settle litigation rather than go to trial, in order to save time and money, but those settlements, while they resulted in fines and penalties, invariably specified that the defendants “neither admit nor deny” the charges brought against them.

Supporters of the SEC’s old policy claim it protected companies from subsequent shareholder lawsuits, as an admission to the SEC would almost surely result in an easy favorable disposition for plaintiffs in any class action or shareholder derivative suit.
One of the most prominent critics of the policy has been U.S. District Court Judge Jed Rakoff, who in 2011 famously declined to sign off on a settlement the SEC had reached with Citigroup, objecting that “The SEC’s long-standing policy—hallowed by history, but not by reason—of allowing defendants to enter into consent judgments without admitting or denying the underlying allegations, deprives the court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.”
Rakoff’s stance met with approval from others who felt those responsible for the economic crisis of 2008 were being let off the hook too easily.  White acknowledged these concerns with her new policy, saying the SEC would insist on admissions in certain cases.
On Thursday, in a public speech, she noted that defendants would only be willing to make such admissions if they believed the agency would go to trial if they were not forthcoming, adding that “Our new approach could lead to more trials and I welcome that possibility.”
Some have pointed out that large companies that find themselves defending SEC enforcement actions can, if those actions are taken to trial, afford the best civil litigators money can buy; individuals who are more competent and experienced than many SEC attorneys.  White brushed off that suggestion, saying the agency’s trial lawyers “are ready to go up against the best of the white-collar defense bar.”
So far, no trials have resulted from application of the new policy.  The SEC has, however succeeded in reaching settlements that include an admission of wrongdoing from JPMorgan Chase & Co. in connection with the “London Whale” trading debacle, and from hedge fund manager Phillip Falcone.
This blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting SEC registration statements, Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, 1933 Act registration statements on Form S-1, S-8 and 1934 Act registration statements on Form 10, OTC Pink Sheet listings, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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