Stein and Piwowar say practice of allowing companies to avoid admitting guilt shouldn’t be ‘on autopilot’
Two SEC nominees have thrown their support behind a proposal to oblige wrongdoers to admit guilt as part of SEC settlements, changing the widely used policy that allows companies charged with violating securities laws to neither admit nor deny guilt in working out settlements.
The nominees ‒ Kara Stein, a Democrat and former staff director of a Senate securities and insurance subcommittee, and Michael Piwowar, the chief Republican economist on the Senate banking committee ‒ also want to see speedier implementation of the Jumpstart Our Business Startups (JOBS) Act and the Dodd-Frank Act, they told their nomination hearing at the US Senate banking committee.
Committee member Senator Elizabeth Warren, in questioning the two nominees, said a change in SEC policy to ‘require admissions of guilt in select enforcement cases… indicates the SEC will show some backbone in critical cases and I think that has important benefits and spillover effects even in other cases in helping create some credibility behind any SEC threat to go to litigation. Do you agree with chairman White’s new policies here?’
Piwowar, who has also served as an economist at the SEC, answered: ‘The no-admit, no-deny policy seems to be on autopilot, and by definition enforcement cases should be on a case-by-case basis. In some cases it is appropriate and in some cases it is not.’
Stein, who currently serves as senior policy adviser and legal counsel to Senator Jack Reed, added: ‘I’m supportive of the policy change and I think the SEC should use all of the tools it has at its disposal to enforce the federal securities law. Nothing should be on automatic pilot.’
The questioning referred to a statement by SEC chairman Mary Jo White early last month that the SEC is reviewing its policy of allowing companies to settle without admitting to any wrongdoing, in light of several recent high-profile cases, including those against NASDAQ for alleged mishandling of the Facebook IPO, ISS for alleged failure in protecting proxy information leaked by a former employee, and other cases against major banks.
