Largely overlooked by both sides, however, are two unintended consequences likely to flow from court-mandated admissions of wrongdoing in SEC cases.
First, as in other facets of life, when government policy makes something more difficult and costly, rational people seek alternatives to avoid the increased burden and expense. In the realm of SEC law enforcement, the most obvious alternative would be to settle more cases through the SEC administrative process, which requires no oversight by the courts….
A second unintended consequence of mandatory admissions of wrongdoing would be weaker settlements overall. SEC settlements result from intense back-and-forth negotiations over many interrelated terms, with each side seeking the most advantageous result possible on the terms that matter most to them. Like any other negotiation, the parties eventually reach a delicate compromise at a point where each side is willing—just barely—to accept the overall deal.
‘Enforcement 40’ for 2020
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