WASHINGTON — The Securities and Exchange Commission will no longer allow companies to settle civil cases by neither admitting nor denying guilt if at the same time the companies admit to or are convicted of criminal wrongdoing.
The agency characterized the changes as minor. In a statement Friday, Robert Khuzami, the SEC's director of enforcement, said the new policy would apply only to "a minority" of its cases.
Notably, the changes would have no impact on the SEC's proposed $285 million settlement with Citigroup Inc., which was rejected by a federal judge in November. Citigroup hasn't been convicted of or admitted to criminal wrongdoing in the matter.
U.S. District Court Judge Jed Rakoff rejected and criticized the SEC's boilerplate "confirm nor deny" language in the proposed settlement, saying it was hard to tell what the SEC got out of the agreement "other than a quick headline."
The SEC is appealing Judge Rakoff's decision and maintains it would be unwise for the SEC to be forced to reject proposed settlements simply because a company refused to admit guilt.
Khuzami said the policy change came after a review by senior enforcement staff last spring and separate discussions with commissioners "over the last several months." It was formally modified last week.
In the statement, Khuzami said it "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."