On Monday, Federal Judge Jed Rakoff ruled on the SEC's latest settlement agreement - a $3 million agreement with Vitesse Semiconductor and 3 former execs over improper accounting of revenue and the backdating of stock options.  He approved the settlement - finding the terms to be fair, reasonable and in the public interest.  But, he also got in his "last licks."

1.  Judge Rakoff, once again, chafed at what he described as the SEC treating the court as a "rubber stamp."

2.  He again criticized the SEC over the way it strikes securities settlements.

3.  He blasted away at the boiler-plate language, "without admitting or denying wrongdoing," that's found in nearly every securities regulatory settlement.  [Wall Street firms prefer that language as a defense in shareholder lawsuits, and it undoubtedly makes it easier for regulators to achieve an enforcement action.]

4. Judge Rakoff chided the legacy of settlements as having been something less than desirable:  

The result is a stew of confusion and hypocrisy unworthy of such a proud agency as the SEC. The defendant is free to proclaim that he has never remotely admitted the terrible wrongs alleged by the SEC;  but, by gosh, he had better be careful not to deny them either - though, as one would expect, his supporters feel no such compunction.  Only one thing is left certain:  the public will never know whether the SEC’s charges are true, at least not in a way that they can take as established by these proceedings.

This might be defensible if all that were involved was a private dispute between private parties.   But here an agency of the United States is saying, in effect, "Although we claim that these defendants have done terrible things, they refuse to admit it and we do not propose to prove it, but will simply resort to gagging their right to deny it."

Judge Rakoff's skepticism about securities settlements first came to prominence in September 2009, when he rejected a proposed $33mn settlement between the SEC and Bank of America over its acquisition of Merrill Lynch.   [NYT Dealbook, 3/21]