by Gary S. Matsko
Washington Legal Foundation
April 07, 2014
Judicial criticism of Securities and Exchange Commission (SEC) settlement practices involving Wall Street have fueled a fierce debate over those practices. To date, the controversy has centered on permitting defendants in SEC proceedings to settle claims “without admitting or denying” the SEC’s allegations. Yet, any re-assessment of SEC settlement practices must consider the post-judgment restraint on speech that the SEC imposes. The SEC requires all settling parties to agree that they will neither directly nor indirectly make any public statement that calls into question the accuracy of any allegation made in the SEC’s complaint. Thus, a settling party who had meritorious defenses, but could not afford to litigate, may not say so publicly. Moreover, the policy can allow government lawyers to operate “in the shadows” by preventing those with the greatest knowledge of the stated accusations or the process used to develop those accusations from criticizing either.

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