The SEC and its settlement practices will begin 2012 right where it's been this past month - atop the national and business media circus.  That's been guaranteed by the House Financial Services Committee, which will hold hearings on the subject in early January. The hearings are supported by Democrats and Republicans alike, who want to better understand why the SEC enters into settlements with large corporations and others while allowing these defendants to neither admit nor deny the charges.   It certainly is not an enviable spot for the nation's top securities regulator.

“The SEC’s practice of using ‘no-contest settlements’ has raised concerns about accountability and transparency.” --  Representative Spencer Bachus (R-AL), who chairs the House Financial Services Committee.

Representative Barney Frank (D-MA), the leading Democrat on the committee, praised Mr. Bachus for announcing a hearing and said:  “The policy of signing agreements without forcing firms to admit or deny wrongdoing raises serious issues.”

From Judge Rakoff, to The House, to ??????? U.S. District Court Judge Jed Rakoff aroused the country's anti-Wall Street sentiment by rejecting the SEC's $285 million settlement with Citigroup.  The Judge grabbed the media's attention which, in turn, stoked the public's passions, by publishing Judge Rakoff's statement in his written ruling, that he could not determine whether the settlement was fair because there were no proven or accepted facts in the case on which to evaluate the settlement. Citigroup stands accused of fraud for selling a portfolio of mortgage-related securities to investors without disclosing that it had bet against many of the items in the portfolio.  But it would not admit that it did anything wrong.  That led Judge Rakoff to reject the agreement and order the two sides to prepare for trial.  The SEC last week said it would appeal the ruling. The SEC continues to defend the agreements, saying that such settlements allow the commission to bring enforcement actions against companies and extract penalties without having to bear the costs and the uncertain outcome of a trial.  SEC Enforcement Director Robert Khuzami adds that the Commission usually achieves the same settlement by this method that it might expect otherwise expect at a trial - and he notes that other enforcement agencies also commonly employ the practice. For further details, go to:   [DealBook, 12/16/11]