SEC to Consider Disqualification Waivers in Regulatory Settlements Talks
Securities and Exchange Commission Chair Paul Atkins on Friday said he was reviving a practice in which the commission considers requests for waivers to disqualifications triggered by an enforcement action as part of settlement negotiations.
In a statement, Atkins said that the SEC would evaluate settlement offers that address underlying violations that lead to “automatic disqualifications and other collateral consequences,” along with the related waiver requests for those disqualifications.
Under the Biden administration, the commission had evaluated settlement agreements and waiver requests separately. In early 2021, then Acting SEC Chair Allison Herren Lee – who was appointed during the first Trump administration – had separated the two in a break from a policy initiated under former SEC Chair Jay Clayton. Herren Lee argued that the move restored a long-standing agency practice focused on protecting investors and ensuring both processes remained fair, according to a statement at the time.
Firms swept up in an enforcement action typically seek waivers if the violation results in the loss of an exemption or imposes consequences “far beyond the settled conduct,” such as negatively impacting an issuer’s ability to raise capital or an asset manager’s ability to serve funds, Cynthia Kelly, a managing director at STP Investment Services, said in an email.
“This is procedural, not a relaxation of standards,” she said of the move by Atkins. “Considering the settlement and waiver together lets the Commission weigh the full remedial package, compliance undertakings, and investor protection outcomes in one decision rather than in silos.”
The new process does not change underlying legal standards or the SEC’s discretion, Kelly said. Rather, it creates more consistency, allowing the commission to weigh both the settlement and the requested waiver in one package and “decide each on the merits,” she said.
Read more from Cynthia Kelly and other experts in FundFire.
