SEC Changes Policy on Settlement Language; “Neither Admit Nor Deny” Approach Narrowed

9 January 2012
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Key takeaways:

  • The Securities and Exchange Commission (“SEC”) has announced a change in policy aimed at settling parties with parallel criminal convictions or resolutions.
  • Under the new policy, settling defendants will no longer be permitted to invoke “neither admit nor deny” language in settlements with the SEC if, in a parallel action with overlapping facts, (i) the defendant was convicted of a crime, or (ii) the defendant entered into a Non-Prosecution Agreement (“NPA”) or a Deferred Prosecution Agreement (“DPA”) which included admissions or acknowledgments of criminal conduct.
  • While the practical implications of the SEC’s policy change appear not to have changed the settlement landscape considerably, in light of the continued pressure on the SEC’s “neither admit nor deny” policy from courts, commentators and members of Congress, the SEC’s announcement may signal more dramatic changes yet to come in the settlement of cases not involving parallel criminal proceedings.