US regulator to demand admission of wrongdoing

Washington: US securities regulators will no longer let companies settle civil cases without admitting or denying the charges if they have already admitted wrongdoing in parallel criminal cases.

The policy change, announced by Securities and Exchange Commission (SEC) Enforcement Director Robert Khuzami, comes just over a month after a federal judge in New York rejected a proposed $285 million (Dh1.04 billion) settlement between the SEC and Citigroup, in part because the bank had not admitted to wrongdoing.

In that case, no parallel criminal charges have been filed. Khuzami said the SEC's new policy applies in limited circumstances.

The practical impact of the change could be limited. "It is a very small, marginal change," said John Coffee, a professor at Columbia Law School. "It does make them look more flexible...It was ludicrous to say the defendant does not admit charges that he's already pled criminally guilty to."

But for years companies have admitted to a narrow set of facts in resolving a criminal case with the Justice Department, while neither admitting nor denying more colourful language in an SEC complaint.

In one of the most egregious examples, Bernard Madoff pleaded guilty for his role in a multi-billion dollar Ponzi scheme in 2009, but neither admitted nor denied the allegations in a settlement with the SEC.

In rejecting the Citigroup accord, US District Judge Jed Rakoff said the SEC's failure to require Citigroup to admit or deny its charges left him with no way to know whether the settlement was fair.