SEC reviewing guilt-free settlement policy

{mosads}In May, Warren wrote letters to several financial regulators, asking them to justify pursuing such settlements, as well as their resistance to take banks to trial. The outspoken consumer advocate argued that that reticence was limited regulators’ leverage in settlement negotiations, since the threat of damaging litigation was not taken seriously.

While White said she was reviewing the SEC’s policy, she also defended it in her response to Warren. She contended that existing policy provides a “very public measure of accountability,” while allowing the SEC to quickly return funds to victims while preserving agency resources. She added that the SEC is “rigorous and methodical” in analyzing each settlement consideration, and contended that SEC settlements, even with no admissions of guilt, do carry a deterrent effect.

“Detailed factual allegations and findings [are] contained in our complaints, orders instituting proceedings, and settlement documents — factual allegations or findings that represent a virtual road map of the wrongdoing,” she wrote.

She also added that oftentimes it is the financial institution or individual charged that will propose a settlement, and the SEC has been willing to pursue litigation in the past. All told, 70 percent of the 105 actions taken in the wake of the financial crisis began as litigation, according to White.