Facing ferocious criticism that rule-breakers are walking away from investigations with light fines and no admission of guilt, the US Securities and Exchange Commission on Friday announced it was changing its rules. The SEC said it would scrap a legal clause often used in settlements of criminal charges that says companies "neither admit nor deny" guilt - even if they were found in violation and agreed to pay fines.
The move "eliminates language that may be construed as inconsistent with admissions or findings that have already been made in the criminal cases," SEC director Robert Khuzami said in a statement. But the move is unlikely to stem the tide of criticism against the SEC.
Only a handful of criminal cases have been brought related to the financial crisis. Most are civil cases. "The revision applies in the minority of our cases where there is a parallel criminal conviction," Khuzami admitted. In November New York federal court judge Jed Rakoff blocked a SEC settlement with Citigroup, which he said was "recidivist" and which included no statement of guilt despite agreeing to fines of $285 million. The SEC has appealed that decision. Khuzami said Rakoff was setting "a new and unprecedented standard" that will only delay payment and exacerbate investor losses from the bank's allegedly fraudulent sale of mortgage securities.
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