Proposal calls for greater transparency in SEC settlements

Jan 10, 2014
<p>Act would force companies to disclose tax write-offs of fines and oblige regulators to justify confidentiality</p>

A bipartisan proposal in the US Congress would force the SEC and other regulators to disclose all details of any settlement with companies accused of wrongdoing.

The law, proposed by Democrat Senator Elizabeth Warren and Republican Senator Tom Coburn, would force regulators to publicly release details such as whether wrongdoers can claim the settlement as a tax break and whether payments can be reduced for any reason such as particular behavior or actions by the company.

The proposal, called the Truth in Settlements Act, would also oblige regulators to explain why any part of a particular settlement should remain confidential and to tell the public ‘why the interests protected by confidentiality outweigh the public’s interest in knowing about the conduct of the federal government and the expenditure of federal resources’, according to the text of the bill.

Warren and Coburn say the bill would help the public determine the ‘true value’ of settlements with companies that violate regulations to determine whether the punishment is adequate and ensure effective enforcement.

‘Increased transparency will shut down backroom deal-making and ensure Congress, citizens and watchdog groups can hold regulatory agencies accountable for strong and effective enforcement that benefits the public interest,’ Warren says in a press release. ‘Anytime an agency decides an enforcement action is needed, but is not willing to go to court, that agency should be willing to disclose the key terms and conditions of the agreement.’

Under the proposed law, the companies that reach settlements with federal regulators will also be required to state in filings with the SEC whether they have deducted any of the settlement amount from tax payments. The proposal would also oblige the Government Accountability Office to study regulators’ confidentiality procedures and make recommendations to further increase transparency.

Last year, at the insistence of Warren and other lawmakers, the SEC started forcing some accused corporations to admit guilt. Previously, the regulator had often allowed companies charged with violating securities laws to neither admit nor deny guilt in working out settlements.

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