WASHINGTON (CN) - Companies settling civil fraud charges with the Securities and Exchange Commission will no longer be able to "neither admit nor deny" the fraud if they have admitted to, or been convicted of fraud in a parallel criminal proceeding.
     In announcing the change, Robert Khuzami the director of enforcement at the SEC, made clear that the change only applies to cases where there is a criminal conviction parallel to a civil case or an admission of criminal conduct as part of a plea agreement.
     "This policy change does not affect our traditional 'neither admit nor deny' approach in settlements that do not involve criminal convictions or admissions of criminal law violations. In particular, it is separate from and unrelated to the recent ruling in the Citigroup case, which does not involve a criminal conviction or admissions of criminal law violations," Khuzami said.
     In the Citigroup case, U.S. District Judge Jed Rakoff rejected a settlement over a billion dollar collateral debt offering the firm's traders knew was junk, and excoriated the SEC for not requiring the bank to admit to wrong doing.
     The SEC has long maintained that an admission of wrongdoing was unnecessary to carry out its mandate of enforcing civil securities law where the issues are often distinct from those at issue in criminal cases.
     Further distancing the policy change from the contretemps over the Citigroup case, Khuzami said that the change stemmed from a senior staff review in the spring, and subsequent conversations with SEC commissioners.
     From now on SEC settlements will recite the fact and nature of any criminal conviction or plea agreement and commission staff may include "any relevant facts admitted during the plea allocution or set out in a jury verdict," or plea agreement.
     The agency will retain rules that prohibit parties to a settlement from denying SEC allegations or making statements suggesting that the allegations in the settlement are not based on facts.