SEC to require admittance of wrongdoing in some settlements

{mosads}Nonetheless, the change comes as the SEC’s settlement practices have fallen under a microscope. In November, a federal judge threw out a proposed $285 million settlement with Citigroup in large part because it did not require the bank to admit any wrongdoing.

The SEC charged that the bank misled investors in selling a financial product filled with risky mortgages, but U.S. District Judge Jed Rakoff blasted the regulator for agreeing to a settlement where the bank neither admitted nor denied the bad behavior.

“The SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges,” he wrote in his opinion. The SEC is appealing his ruling, and still is pursuing the appeal following the policy change.

Meanwhile, top lawmakers in both parties have also begun to question the practice. In a rare move, the top Republican and Democrat on the House Financial Services Committee jointly announced they would be holding a hearing on the matter. Committee Chairman Spencer Bachus (R-Ala.) “raised concerns about accountability and transparency.”

Other federal and state regulators allow similar types of settlements, with some even allowing defendants to deny the claims while settling.