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PA Bulletin, Doc. No. 00-1454

STATEMENTS OF POLICY

Title 64--SECURITIES

SECURITIES COMMISSION

[64 PA. CODE CH. 604]

Denial of Allegations; Offers of Settlement and Consent Injunctions--Criminal Referrals and Investigations

[30 Pa.B. 4437]

   The Securities Commission (Commission) hereby publishes this statement of policy to read as set forth in Annex A. This statement of policy addresses: (1) denial of allegations in any civil lawsuit brought by the Commission or in any administrative proceeding of an accusatory nature pending before the Commission; and (2) consents, or agreements to consent, to any judgment of a court in a civil case brought by the Commission or a Commission order.

A.  Effective Date

   The statement of policy shall be effective upon publication in the Pennsylvania Bulletin.

B.  Statutory Reference

   Section 510 of the Pennsylvania Securities Act of 1972 (act) (70 P. S. § 1-509) authorizes the Commission to institute investigations for violations of the act. Section 509 of the act (70 P. S. § 1-509) permits the Commission to seek civil injunctive and other equitable relief in the Commonwealth Court and courts of common pleas as well as civil contempt for violations of certain Commission orders. Sections 512, 513 and 602.1 of the act (70 P. S. §§ 1-512, 1-513 and 1-602.1) allow the Commission to impose certain sanctions and administrative assessments. Under § 901.011 (relating to applicability of general rules), administrative proceedings before the Commission are governed by 1 Pa. Code § 31.1 (relating to scope of part) and 1 Pa. Code Part II (relating to General Rules of Administrative Practice and Procedure).

C.  Summary and Purpose

   The purpose of § 604.021 (relating to denial of allegations--statement of policy) is to address the public policy issue of preventing a person from entering into a settlement of an enforcement matter brought by the Commission in which the person denies that the alleged activities ever occurred. In this section, the Commission announces its policy that, in any civil lawsuit brought by the Commission or in any administrative proceeding of an accusatory nature pending before the Commission, it is important to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction is being imposed, when the conduct alleged did not, in fact, occur.

   Therefore, it is the Commission's policy not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or the Commission's order instituting an administrative proceeding of an accusatory nature. The Commission believes that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations. This section is identical to a similar policy statement published by the United States Securities and Exchange Commission at 17 CFR 202.5(e) (relating to enforcement activities).

   Section 604.021 is intended to place defendants in civil lawsuits and respondents in administrative proceedings on notice that anyone who consents or agrees to consent to any judgment or order does so solely for the purpose of resolving investigative, civil or administrative matters and not for the purpose of resolving any criminal charges that have been, or may be brought against them.

   Although section 511 of the act provides for a criminal penalty for violations of the act, criminal authority and responsibility are vested in the Office of Attorney General and the district attorneys of the several counties, not the Commission. Adoption of this statement of policy is intended to emphasize that persons who enter into settlement negotiations and agree to a consent judgment or order know that the consent or order addresses only investigative, civil or administrative matters and has no bearing on resolving criminal charges that have been, or might be brought, against them, including a recommendation made by the Commission under § 501.011 (relating to criminal referrals).

M. JOANNA CUMMINGS,   
Secretary

   (Editor's Note: The regulations of the Commission are amended by adding a statement of policy at 61 Pa. Code §§ 604.021 and 604.022 to read as set forth in Annex A.)

   Fiscal Note: 50-115. No fiscal impact; (8) recommends adoption.

Annex A

TITLE 64.  SECURITIES

PART I.  SECURITIES COMMISSION

Subpart F.  ADMINISTRATION

CHAPTER 604.  INTERPRETIVE OPINIONS OF COMMISSION--STATEMENT OF POLICY

§ 604.021.  Denial of allegations--statement of policy.

   The Commission has adopted a policy that in a civil lawsuit brought by the Commission or in an administrative proceeding of an accusatory nature pending before the Commission, it is important to avoid creating, or permitting to be created an impression that a decree is being entered or a sanction is being imposed, when the conduct alleged did not, in fact, occur. Accordingly, it is the policy of the Commission not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or the Commission's order instituting an administrative proceeding of an accusatory nature. The Commission believes that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.

§ 604.022.  Offers of settlement and consent injunctions--criminal referrals and investigations--statement of policy.

   (a)  In the course of Commission investigations, civil lawsuits and administrative proceedings, Commission staff may discuss with persons involved the disposition of these matters by consent, by settlement or in some other manner.

   (b)  It is the policy of the Commission that the disposition of a matter may not, expressly or impliedly, extend to criminal charges that have been, or may be, brought against the person or a recommendation by the Commission under § 501.011 (relating to criminal referrals) with respect thereto.

   (c)  A person involved in an enforcement matter before the Commission who consents, or agrees to consent, to a judgment or order does so solely for the purpose of resolving claims against him with respect to that investigative, civil or administrative matter and not for the purpose of resolving criminal charges that have been, or might be, brought against him.

   (d)  This statement of policy reflects the fact that neither the Commission nor its staff have the authority or responsibility for instituting, conducting, settling or otherwise disposing of criminal proceedings. That authority and responsibility is vested in the Office of Attorney General and the district attorneys of the several counties.

[Pa.B. Doc. No. 00-1454. Filed for public inspection August 25, 2000, 9:00 a.m.]


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