For decades, the SEC allowed defendants to enter into a settlement agreements where they neither admitted nor denied any alleged wrongdoing.  However, in response to political pressure from Senator Elizabeth Warren (D-Mass), who asked the SEC whether the SEC’s neither-admit-nor-deny settlement policy should be changed to better make use of the SEC’s leverage in the settlement process, the SEC announced that it would be modifying the policy. 

Last year, the SEC revised its policy to no longer allow a defendant to enter into neither-admit-nor-deny settlements where the defendant had already pleaded guilty in a parallel criminal case.  Yesterday, the SEC announced that it will now require a defendant to admit allegations in certain cases involving heightened accountability.  Heightened accountability includes, among other things, misconduct that harmed large number of investor and unlawful obstruction of the SEC’s investigation.  The SEC may also refuse to enter into the settlements where an admission would safeguard the public. 

For years, the SEC’s policy encouraged settlement by allowing defendants to avoid admitting any of the allegations.  The SEC also benefited because cases were quickly resolved, and there was still a sense of public accountability due to the public nature of the settlements.  Over the next few years, it will be interesting to see how, if at all, the policy change affects the SEC.