Bloomberg Law Report took stock of industry concerns following a blistering opinion by Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York that rejected the Securities and Exchange Commission’s (SEC) acceptance of a company’s settlement that did not require the company to admit fault.
It was not the first time Judge Rakoff had rejected an SEC settlement, but “it is unlikely that Judge Rakoff’s decision … will, without more, impact the SEC’s practice,” said Louis Russo, counsel in Alston & Bird’s Litigation & Trial Practice Group and a member of the firm’s International Arbitration Group.
“Even if the SEC were forced to reconsider this practice, it could achieve the same result in other ways,” said Russo. The SEC could “prosecute administratively” or “require admissions of wrongdoing to be worded in such a way as to express contrition, but avoid their use in subsequent litigation as an admission.
“It is unlikely, however, that the SEC will require clear-cut admissions of wrongdoing, as defendants would certainly balk at such a requirement, invariably forcing the SEC to litigate more cases to trial.”