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The Securities and Exchange Commission announced on 13 October a policy change that would force money mobsters to confess to their crimes rather than just getting fined and never having to admit to the fact they broke the law.
TRENDPOST: An example of this policy would be the Wells Fargo fake account scandal of 2016, in which millions were paid in fines to settle charges that the bank had lied to investors. The fines were for negligence rather than fraud (which would have resulted in stiffer penalties); bank officials lost their jobs, but no one went to jail; see “EX-WELLS FARGO CEO SETTLES CASE FOR $2.5 MILLION” (17 Nov 2020).
Another example is the case of WPP, the world’s largest ad agency, which paid over $19 million in SEC fines (over allegations that it had engaged in bribery and other illicit dealings with government officials in India, China, Peru and Brazil) while neither admitting nor denying the charges; see “WORLD’S LARGEST ADVERTISING GROUP A CRIME GROUP” (28 Sep 2021).
Also see “FINANCIAL INDUSTRY FINES SET RECORD” (10 Nov 2020).
Less of the Same
As noted by The Wall Street Journal, the SEC’s announcement reinstates a policy that began during the Obama administration, under which some policy subjects of the agency’s civil enforcement actions were required, as part of their settlements, to admit to the agency’s allegations. Under the Trump administration, the agency had reverted to its pre-Obama policy.
Requiring such admissions of wrongdoing is seen as an enhancement to both the agency’s power to regulate and to the deterrent value of such power. It is also seen as an enhancement of public trust in financial and government institutions.
TREND FORECAST: The new SEC policy may indeed put a crimp in the “Get Out of Jail Free card” the “Bigs” have traditionally enjoyed, which has essentially allowed them to lie and cheat with impunity.
As the WSJ points out, admission of wrongdoing opens the door to private lawsuits brought by investors or others harmed by corporate misdeeds, and such admissions would surely be brought into evidence. Therefore the SEC can expect pushback against its new policy from companies afraid of incurring damages beyond SEC monetary penalties.