In a public statement, SEC Commissioners Hester M. Peirce and Elad L. Roisman disagreed with SEC Acting Chair Allison Herren Lee's announcement that the Division of Enforcement would no longer recommend settlement offers conditioned on granting a waiver (see previous coverage here).
Ms. Peirce and Mr. Roisman stated that the policy change reinstates an "artificial separation" between the settlement and waiver processes and denies the reality that "an entity's willingness to reach a prompt settlement on just and fair terms often is influenced by its concerns regarding the potential collateral consequences of entering into the settlement." Ms. Peirce and Mr. Roisman argued that contingent settlement offers did not create "structural conflicts or pressure" between the Division of Enforcement in assessing an offer to settle and the Division of Investment Management and the Division of Corporation Finance in assessing requested waivers. They asserted that the policy change is a return to an "unwieldy process" and will result in investigations taking longer to resolve.
Commentary
Commissioners Peirce's and Roisman's objections are well-founded. As noted when former Chair Clayton announced the policy, the Commission's consideration and acceptance of contingent settlement offers made good sense. It streamlined the settlement process and allowed firms to make clearer settlement decisions by knowing the collateral consequences of entering into a settlement before being bound to its terms. It did so without limiting the Commission's ability to separately consider the two requests - based on separate recommendations from the Division of Enforcement and the appropriate policy division - and reject any waiver requests it determined were inappropriate. In the words of Commissioners Peirce and Roisman, "[i]n short, it worked well."
Primary Sources
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