The SEC doesn't want to let firms and individuals get by without admitting wrongdoing anymore as part of enforcement actions

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The SEC doesn't want to let firms and individuals get by without admitting wrongdoing anymore as part of enforcement actions
Gurbir Grewal directs the SEC's division of enforcement. AP Photo/Matt Rourke, File
  • The SEC will require companies involved in settling some civil enforcement actions to admit wrongdoing, according to a Wall Street Journal report.
  • The agency that enforces laws against market manipulation largely abandoned admissions of wrongdoing during the Trump administration.

The Securities and Exchange Commission will return to a policy of requiring companies involved in settling some civil enforcement actions to admit wrongdoing, according to a Wall Street Journal report on Wednesday.

Such admissions in certain cases will strengthen the deterrent value of enforcement actions and increase public trust in financial and government institutions, said SEC Enforcement Director Gurbir Grewal, who addressed an annual agency conference sponsored by the Practising Law Institute.

"When it comes to accountability, few things rival the magnitude of wrongdoers admitting that they broke the law," Grewal was quoted as saying by WSJ. "Admissions, given their attention-getting nature, also serve as a clarion call to other market participants to stamp out and self-report the misconduct, to the extent it's occurring in their firm."

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The agency that enforces laws against market manipulation is returning to a policy started during the Obama administration that was largely abandoned during the Trump administration, the report said.

The SEC in 2013 said it would make companies and individuals admit wrongdoing as a condition of settling civil charges in certain cases. The agency at that time was facing pressure to show it could clamp down on Wall Street abuses after failing to detect practices in mortgage-bond and derivatives markets that contributed to the 2008 global financial crisis.

But businesses may resist the SEC's latest shift because admitting violations of the law can lead to other consequences. For example, investors or other parties may file litigation claiming they were harmed by wrongdoing.

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Meanwhile, the SEC also can refer fraud cases to the Department of Justice which can enforce securities laws through criminal penalties. Fraud is the most serious type of allegation the SEC investigates.

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