By Jessica Holzer Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The Securities and Exchange Commission's enforcement chief is set to defend the SEC's heavy use of settlements in enforcement actions, including its practice of allowing defendants to settle charges while neither admitting nor denying wrongdoing. SEC Enforcement Chief Robert Khuzami, in a hearing Thursday, will argue settlements allow the SEC to bring wrongdoers to account closer to the time of the alleged violations and preserve scarce resources to stop other frauds. "Quick action by law enforcement communicates to other potential wrongdoers that those who violate the law face swift and certain sanctions," Khuzami said in prepared testimony for a U.S. House Financial Services Committee hearing. Officials from the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency will also testify about their settlement practices at the hearing. The SEC's practice of allowing defendants to settle civil charges without admitting or denying guilt has come under fire from judges and lawmakers. U.S. District Court Judge Jed Rakoff cited the SEC's policy in his decision last year to reject the regulator's $285 million settlement with Citigroup Inc. (C) over allegations the company misled investors in securities tied to risky mortgages. The SEC is currently appealing the decision. Khuzami argued forcing defendants to admit to securities violations as part of a settlement would result in far fewer settlements and thereby hamper the agency's ability to penalize wrongdoers and deter fraud. "The fact is that requiring admissions as a condition of settlement would likely result in longer delays before victims are compensated, dilution of the deterrent impact of sanctions imposed because of the passage of time, and the expenditure of significant SEC resources that could instead be spent stopping the next fraud," he said in prepared testimony. Khuzami said defendants are unlikely to agree to settlements where they have to admit guilt because it exposes them to greater civil and criminal liability. He noted the SEC, as opposed the Department of Justice and the Federal Trade Commission, doesn't allow defendants in a settlement to deny the alleged wrongdoing. -By Jessica Holzer; Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com
