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Richard J. Lambert was named by Best Lawyers® as a 2021 Corporate Law “Lawyer of the Year.”

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Businesses barred from ‘neither admit nor deny” defense, SEC says

Companies and individuals will no longer be able to say they “neither admit nor deny” wrongdoing in a civil case if they’ve admitted to related criminal charges following a policy change by the Securities and Exchange Commission. The change, which is already in effect, could have a major impact on commercial litigation nationwide.

The policy change was born out of a case involving Citigroup, in which a judge tossed out a $285 million settlement with the SEC that included that language. But the change won’t affect that case, in part because there was no accompanying criminal case against the corporation. In fact, it will only apply to SEC cases in which a company or individual has already admitted to criminal charges filed against them. The SEC only files civil charges.

The SEC’s enforcement director said the policy change, which the commission has been considering since last spring, will not apply to cases in which companies don’t admit to related criminal charges filed against them and aren’t convicted of those charges.

The policy change will make the language used in SEC settlements more consistent with that in their respective criminal trials. In a case last month, a bank agreed to pay a $148.2 million settlement for federal and state charges accusing it of rigging dozens of bidding competitions. The bank neither admitted nor denied the allegations by the SEC, but did admit to the Justice Department that it had manipulated the bidding process.

The problem with such inconsistency, according the U.S. district judge in the Citigroup case, is that it makes it hard for judges to know whether the penalties a company is paying in settlements are justified by the facts. The new policy change should clear up that confusion, though it may put an extra burden on companies defending themselves in civil cases involving the SEC.

Source: Law.com, “SEC Changes ‘Neither Admit nor Deny’ Policy,” Associated Press, Jan. 9, 2012

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