The SEC has tended to like this setup because it makes it easier to enforce the law, collect fines and move on. No messy tedious trials that take time, lawyers and resources.
The offending companies like it because they don't have to publicly declare guilt, which would set them up for private lawsuits by victims.
But a few lawmakers and jurists don't think it should work that way and have been leaning on the agency to change the process. And it looks like it will…at least a little bit. In a recent speech, the new SEC head, Mary Jo White, said the agency would start to demand companies admit guilt as part of a settlement…but only in a few cases. And she wasn't really clear on what those cases would be.
"It will be to some degree case by case, but obviously with some guidance for the staff as to what kinds of cases," she said at the Wall Street Journal's CFO conference in Washington, D.C. last week. "…You have to balance everything, strength of case, the harm done, how egregious the conduct was, and how important, perhaps, it is to get a quick resolution."
She amplified her comments in an interview with the New York Times columnist James Stewart.
"Compelling companies to admit guilt as a condition of a settlement may help prevent fraud. The approach may be helpful, but probably grossly insufficient," said Lev Janashvili, managing director of GMI Ratings, a group that follows corporate governance issues, in a statement to CNBC.
"The company either followed accounting principles (GAAP),or not; there are no uncertainties here," said Baruch I. Lev, a professor of accounting and finance at NYU. "So, I really don't see any reason to settle without admission. Companies have huge accounting and legal resources to contest the SEC. If they can't, they should clearly admit wrongdoing. From an educational perspective, you don't learn anything from a settlement without admission. The important educational benefits come only with a clear admission."