Hedge fund honcho Steve Cohen is suddenly looking pretty lucky.
Just months after Cohen’s SAC Capital agreed to a $602 million SEC settlement over insider trading — without admitting any wrongdoing — the SEC is talking tough.
Mary Jo White, the new head of the Securities and Exchange Commission, plans to hold a town hall meeting to discuss when to require some defendants to admit to wrongdoing as a condition of settling SEC enforcement actions, The Post has learned.
Staffers of the SEC’s enforcement division have been instructed to assess their “ongoing investigations and pending actions” with an eye toward “whether the conducts and circumstances” might require a public admission of guilt, according to an internal letter sent on Monday.
CLICK TO READ THE FULL LETTER HERE
The policy shift described in the letter, a copy of which was obtained by The Post, comes on the heels of growing dissent over the agency’s practice of allowing defendants to settle cases without admitting wrongdoing.
Manhattan federal Judge Jed Rakoff shone a spotlight on the practice in November 2011 when he rejected a $285 million settlement between Citigroup and the SEC over allegations of securities fraud, saying the public was “deprived of ever knowing the truth in a matter of obvious public importance.”
Since then a series of judges have balked at similar settlements, including the SEC’s record settlement with Cohen’s SAC Capital.
In March, Manhattan federal judge Victor Marrero questioned SAC’s $602 million settlement because it didn’t require the $15 billion hedge fund giant to admit any guilt.
“It seems counterintuitive and incongruous to settle a case for $600 million that might cost $1 million to litigate,” Marrero said. “How believable is it to the public, the claim that they did nothing wrong?”
Marrero ended up approving the settlement contingent on an appeals court case over the judges-led crackdown on the settlements.
According to Monday’s letter, sent by SEC enforcement division co-directors George Canellos and Andrew Ceresney, the agency would do away with the “neither admit nor deny” policy in limited cases.
Currently, the agency only forbids such settlements in cases in which the defendant admitted guilt elsewhere, such as in a parallel criminal case.
Other types of cases that might start receiving tougher treatment include:
* Misconduct that harmed large numbers of investors or placed investors or the market at risk of serious harm;
* Admissions of guilt that might protect the investing public, particularly when defendants have engaged in egregious intentional misconduct;
* Defendants who have obstructed the SEC’s investigations.
A spokesman for the SEC said the date of the meeting is still to be determined.
Yesterday, White announced the broader shift in policy at a conference sponsored by the Wall Street Journal.
“We are going to, in certain cases, be seeking admissions going forward,” White said at the annual event in Washington. “Public accountability in particular kinds of cases can be quite important and if we don’t get them, then we litigate them.”
SEC letter describing policy shift on Wall Street wrongdoing