Settling SEC Enforcement Actions

Introduction

This article discusses the Securities and Exchange Commission (the SEC or Commission) settlement process, focusing on key guiding principles that counsel should have in mind when negotiating with the SEC.

Why settle? Why not fight? These are questions that any party caught up in litigation will eventually face. In the context of an impending SEC enforcement action, however, these questions can be challenging to assess.

If a party is unable to convince the SEC staff (the Staff) that no enforcement action is warranted, the decision whether to litigate or settle with the SEC is akin to a Hobson's choice – in this case, the need to choose one of two equally unpleasant alternatives. For some, the decision to settle is a pragmatic business or personal decision having less to do with the relative merits of the case than with the expense of litigation and desire to put the matter to rest. For others, the decision hinges on mitigating the potential