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ARTICLE · 22 APRIL 2010

Parties that Settle with the US SEC May Face Greater Collateral Legal Risk

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Two recent developments suggest an increased collateral legal risk for persons and entities that enter into settlements with the US Securities and Exchange Commission (SEC).

United StatesLitigation, Mediation & Arbitration
Stanley Parzen
Stanley Parzen
Dana Douglas
Dana Douglas
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Originally published April 15, 2010

Keywords: SEC, settlement proposal, SEC investigation, admissability, Pentagon Capital

Two recent developments suggest an increased collateral legal risk for persons and entities that enter into settlements with the US Securities and Exchange Commission (SEC). First, the SEC recently has suggested that it may release official statements detailing the facts underlying an investigation and settlement as part of the settlement process. Second, a recent federal district court decision from the Southern District of New York held that certain fact-finding documents created in connection with an SEC settlement were not inadmissible hearsay but instead were admissible in a federal court proceeding. Together, these two events suggest that SEC settlements may well lead to fact finding documents that later could be admissible in civil litigation or regulatory proceedings.

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