Media Coverage
Source: Compliance Week
Media Coverage
09.10.13
After years of allowing defendants to quietly pay penalties to settle charges without admitting to anything, the Securities and Exchange Commission’s new policy is to obtain admissions of wrongdoing in order to settle certain enforcement actions. However, the policy is creating legal headaches for companies that now have to weigh the legal risks that an admission could carry.
Marc Axelbaum and Sarah Good, partners in Pillsbury’s litigation practice in San Francisco, spoke to Compliance Week about the issues raised by the SEC’s new approach.
Axelbaum noted that an admission of wrongdoing in an SEC action might encourage prosecutors waiting in the wings to bring criminal charges that otherwise would not be brought.
Additionally directors and officers under investigation would need to assess whether an admission of wrongdoing would cause them to lose their directors and officers insurance coverage. According to Good, having no D&O insurance could have a “very negative consequence” on the ability of directors and officers to defend themselves in any parallel litigation that may exist.
Good also noted that companies are “much more likely to go through discovery” to try to show the SEC “why a settlement for an admission of liability would be inappropriate.”