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You may have lost money in your investment portfolio,
due to mismanagement and not even know it.

In securities fraud case, what does "neither admit nor deny" mean?

Neither admit nor deny.

Those words, or a close variant thereof, are seen so often in securities fraud cases involving alleged wrongdoers that they might sometimes strike readers as being close to obligatory inclusions.

What exactly do they mean, and why do parties on the receiving end of a civil complaint filed by the U.S. Securities and Exchange Commission so frequently utter them?

You're right, it's about liability. And honor, although the application of that word might be stretching things when it comes to, say, an investment bank that has just agreed to cough up a massive amount of money in response to multiple accusations centered on investment fraud.

It happens all the time. In fact, it happened just last month in a case involving three broker-dealer firms linked with the American International Group, Inc. Those entities (collectively, the "firms") settled a case with the SEC for breach of fiduciary duty and conflict of interest by paying out nearly $10 million in disgorgement fees, prejudgment interest and civil money penalties.

A media report describing the settlement states that in doing so, the firms "consented to the SEC's order without admitting or denying" the various acts of investor fleecing that government regulators say they engaged in.

Admitting guilt is obviously a weighty admission, and it stands to reason that even a guilty party will go to great lengths to avoid doing so when it has a card or two to play when negotiating the details of a settlement with the SEC.

For its part, the SEC often downplays the importance of guilt denial, emphasizing instead sizable money recoveries that feature in a case.

This reality is certainly apparent, though, when it comes to a company's ready ability to deny wrongdoing in an investment fraud matter where the facts solidly point toward guilt: A well-heeled securities firm can commit wrongdoing over and over and just as routinely deny guilt, so long as it has sufficiently deep pockets to mollify government regulators.

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