2017] ADMISSIONS IN SEC ENFORCEMENT CASES 115
compliance enhancements are not enough. An added measure of public
accountability is necessary.”3
The new policy marked a radical departure from the way the agency had
traditionally done business, and it was met with considerable consternation
from the defense bar and others who were concerned over its potentially
deleterious consequences. Although Chair White and SEC enforcement staff
insisted that admissions would only be required in egregious cases—and
no-admit/no-deny would otherwise continue to be the norm—many voiced
their concerns over the collateral consequences that admissions could have in
private securities actions, particularly for large, deep-pocketed institutions.4
Such critics predicted that these large institutions would be unwilling to settle
if settling required admissions.5 The result would be an increase in litigation
which could cripple the SEC’s enforcement program.6 When the policy was
first disclosed, one prominent law professor told the Wall Street Journal that the
change “would be immense” because admissions could be used in class-action
lawsuits and “[t]he Goldman Sachs and Morgan Stanleys of this world . . . do
not want to admit guilt.”7 A defense lawyer, and former SEC enforcement
attorney, told the same publication that the cost of follow-on securities
litigation could be so large that companies might decide to take their chances
battling the SEC in court rather than settling.8 The former director of the
SEC’s San Francisco office, now a defense lawyer, called the new policy
“troubling,” and predicted that in the face of potentially massive collateral
damages, “companies and their officers will be incentivized to take more cases
to trial,” straining the SEC’s “already limited enforcement resources further”
and leaving “less time to pursue new investigations and shut down ongoing
frauds, with any incremental benefit from seeing bad actors admit their
wrongdoing offset by a delay in any financial recovery for investors (if such
recovery can be had at all).”9 He concluded that “the SEC has unfortunately
moved in a dangerous direction that could have monumental implications for
the agency’s ability to fulfill its core mission of protecting investors.”10
3. Mary Jo White, Chair, SEC, Speech at the Council of Institutional Investors Fall
Conference: Deploying the Full Enforcement Arsenal (Sept. 26, 2013) (t ranscript available at
4. See infra Part I.D.
5. See infra Part I.D.
6. See infra Part I.D.
7. Jean Eaglesham & Andrew Ackerman, SEC Seeks Admissions of Fault, WALL ST. J., (June 18,
2013, 8:51 PM) (quoting Professor James Cox), https://www.wsj.com/articles/SB1000142412788
8. Id. (quoting attorney Stephen Crimmins); see also Daniel Fisher, Why Settling with the SEC Can
Be Worse Than Losing at Trial, FORBES (Jan. 29, 2014, 8:13 AM), https://www.forbes.com/sites/
9. Marc Fagel, The SEC’s Troubling New Policy Requiring Admissions, 45 SEC. REG. & L. REP.
(BNA) 1172, 1173 (2013).
10. Id. at 1175.