On September 26, Chair Paul Atkins announced that the Securities and Exchange Commission (SEC) will return to its practice of considering settlement offers to resolve pending or anticipated enforcement proceedings simultaneously with related waiver requests. This will help avoid piecemeal consideration of enforcement settlement terms and requested disqualification relief, which is both expensive and time-consuming for respondents, particularly when enforcement settlements and associated waiver requests are often premised on common facts.
It will also allow respondents to assess the collateral consequences arising from an underlying enforcement action when deciding whether and how to resolve it. The ability to obtain a waiver can be as consequential for respondents as the principal settlement terms that resolve an action. Indeed, without a waiver, many respondents may be disqualified from well-known exemptions and employment and associational opportunities, including seasoned issuer status and the ability to participate in exempt offerings or affiliate with registered entities.
By combining consideration of settlement offers and waivers, the SEC returns to the process adopted by former Chair Jay Clayton in 2019. The SEC abandoned that concurrent consideration process in 2021, requiring final consideration of enforcement settlements first and declining to allow respondents to condition settlement offers on granting a waiver request. As a result, current and prospective respondents had to evaluate enforcement settlements without knowing if the SEC would waive statutory or regulatory disqualification and other collateral consequences arising from settlement.
Under the new policy, the SEC may now once again comprehensively consider the full scope of settlement consequences to a respondent in a single proceeding. Moreover, in addition to avoiding “siloed internal consideration” of these proposals, the SEC will be able to ensure proportionality and consistency by drawing on expertise across its divisions. As Atkins highlighted, the new process promotes fairness for respondents and increases efficiencies at the SEC.
Notably, the SEC remains free to reject an offer of settlement entirely or choose to consider the enforcement piece and waiver request independently. If the SEC denies a waiver request, respondents will be promptly notified so they can decide how to proceed. Respondents will then have five business days to notify the SEC of their decision.
While the SEC ultimately retains substantial discretion over all offers of settlement and waivers, the new policy provides an opportunity for entities and individuals facing enforcement actions to make more informed and strategic decisions about their cases. By permitting contemporaneous waiver requests, respondents will be better positioned to evaluate settlement terms and, if resolving an action is appropriate, help them proactively mitigate collateral consequences of a settlement. Overall, the policy should help reduce uncertainty and enhance the efficiency of the SEC’s resolution process.
If you have any questions, or would like additional information, please contact one of the attorneys on our White Collar, Government & Internal Investigations team.
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