Jan 16

Print this Post

SEC Changes it Policy on Fraud Settlement Language…Somewhat

The Securities and Exchange Commission (“SEC”) has made a nuanced policy shift toward its fraud investigation settlements.  Previously the SEC allowed companies to settle fraud charges by paying a fine without admitting wrongdoing.  This practice has received widespread criticism despite SEC claims that it encouraged settlement and avoided expensive litigation.

Going forward, the SEC will no longer allow defendants to say they neither admit nor deny civil fraud or insider trading charges when they have been convicted of and/or admitted to criminal charges.  However, the agency will still allow the “neither admit nor deny” language when the agency reaches a settlement deal with a company, but no criminal proceedings (ie with the Justice Department) have been resolved.  This continued allowance will likely garner continued criticism, since it helps the accused companies in the shareholder lawsuits that usually follow.  The language from the SEC is obviously less important when the Justice department has already secured a conviction.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2012/01/sec-changes-it-policy-on-fraud-settlement-language-somewhat/

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>