Right after my last post about proposed SEC changes to reduce financial reporting, today’s press notes an SEC proposal sent to the White House which would reverse  a 54-year old rule  barring defendants against SEC civil actions, who choose to settle, from being allowed to deny culpability.  Today, the defendant in a settlement can only announce that the matter has settled, leaving on the public record a description of the complaint and the payment made by the target to make it go away.

Not surprisingly, interested parties and groups subject to SEC enforcement actions have been bringing suits to effect this change in SEC policy, trying also to bring the matter to the Supreme Court (think Elon Musk and Mark Cuban).

Investor advocates of course object to this change in practice, claiming that the now-permitted denial by a defendant short-changes the investing public by withholding  valuable information (eg that a guilty party may have just bought his way out the charge by writing a check).

Fairness does suggest that there are circumstances when innocent parties receive complaints from zealous regulators which are ill-founded; resisting such complaints is not easy, typically requires hiring attorneys, and  is quite expensive; particularly, smaller companies or less affluent individuals may not have much of a choice but to plead it out and pay a fine, leaving an implicit black mark on the public record.

Those of us who over the years have fought esoteric claims against the SEC, dealing with junior regulators right out of law school, understand the position  that defendants ought to be able to say, in effect, “we give up but think we did [whatever] correctly.”  And given the current Administration’s deregulation bias, it is not surprising to see the current SEC proposing this policy change, albeit of a 54 year practice.