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Public Statement by SEC Staff: Recent Policy Change

Robert Khuzami

Director of the SEC’s Division of Enforcement
U.S. Securities and Exchange Commission

Jan. 7, 2012

Following a review by senior enforcement staff that began this spring and separate discussions with the Commissioners over the last several months, last week we modified our settlement language for cases involving criminal convictions where a defendant has admitted violations of the criminal law.  As explained below, 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.

Under our traditional "neither admit nor deny" approach, a defendant could be found guilty of criminal conduct and, at the same time, settle parallel SEC charges while neither admitting nor denying civil liability.  This approach has reflected that the goals, objectives and other factors in the civil settlements that we and other federal and state agencies enter into often are distinguishable from those at issue in criminal proceedings.  It nevertheless seemed unnecessary for there to be a "neither admit" provision in those cases where a defendant had been criminally convicted of conduct that formed the basis of a parallel civil enforcement proceeding. 

The change applies to cases involving parallel (i) criminal convictions or (ii) NPAs or DPAs that include admissions or acknowledgments of criminal conduct.  Under the new approach, for those settlements we will:

  • Delete the “neither admit nor deny” language from the settlement documents.
  • Recite the fact and nature of the criminal conviction or criminal NPA/DPA in the settlement documents.
  • Give the staff discretion to incorporate into the settlement documents any relevant facts admitted during the plea allocution or set out in a jury verdict form or in the criminal NPA/DPA.
  • Retain the current prohibition on denying the allegations of the Complaint/OIP or making statements suggesting the Commission’s allegations are without factual basis. 

The revision applies in the minority of our cases where there is a parallel criminal conviction (by plea or verdict) or criminal NPA/DPA involving factual or legal claims that overlap to some degree with the factual or legal claims set out in the Commission’s complaint or OIP. 

This policy change does not affect our traditional "neither admit nor deny" approach in settlements that do not involve criminal convictions or admissions of criminal law violations.  In particular, it is separate from and unrelated to the recent ruling in the Citigroup case, which does not involve a criminal conviction or admissions of criminal law violations.  We have appealed that ruling and the reasons for that appeal are described in the public statement I issued at that time. 

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