Photographer: Joshua Roberts/Bloomberg
Photographer: Joshua Roberts/Bloomberg

Now that SAC Capital Advisors LP has reached its criminal-plea deal with federal prosecutors, it’s worth taking a moment to look back on the hedge fund’s civil settlement earlier this year with the Securities and Exchange Commission and what an awful charade it was in one crucial respect.

In March, the commission struck a $616 million pact with Steven A. Cohen’s hedge fund to resolve claims of insider trading. Most importantly, it let SAC neither admit nor deny the agency’s allegations -- which looks especially dumb now, considering that SAC just agreed to plead guilty to fraud charges and pay $1.8 billion. (Actually, the penalty is more like $1.2 billion, because prosecutors said they would give the hedge fund credit for the $616 million in the earlier accord.)

This illustrates why SEC Chairman Mary Jo White was correct to revise the agency’s policies on no-admit settlements soon after she took office in April. At least now, in instances that the commission deems egregious, the SEC doesn’t automatically use the neither-admit-nor-deny language in its settlement papers. Instead, on rare occasions, it has begun to require defendants to admit wrongdoing.

This doesn’t go far enough, because the acknowledgements fall short of straightforward admissions of liability. For instance, this year when JPMorgan Chase & Co. settled the SEC’s claims over the London Whale trading debacle, the bank said it "acknowledges that its conduct violated the federal securities laws" -- without saying which laws.

At least that’s better than what the SEC did in its settlement with Cohen’s firm. By the time the agency struck its deal with SAC Capital, one former employee at the heart of the civil case, Jon Horvath, already had been convicted criminally. At his plea hearing last year, Horvath said: “I knew that what I was doing was wrong and illegal.” Horvath’s actions were imputed to the firm as part of the SEC’s complaint. Yet the SEC let Cohen’s hedge fund settle without admitting anything, even though the agency’s standard of proof at a civil trial is far lower than what is required in a criminal case.

At least we know that today, if the commission had to do it all over again, it probably wouldn’t let a defendant like SAC Capital off with a no-admit settlement. This may be only small progress, but it’s something.

(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)