Washington (AFP) - Three years ago, the new chief of the main US financial markets regulator warned Wall Street the kid gloves were coming off.
Fabled former federal prosecutor Mary Jo White, who took charge of the Securities and Exchange Commission in 2013, said the worst offenders would have to confess to wrongdoing in order to reach settlements with her agency.
But as White, one of the longest-serving SEC chairs, prepares to step down next month, her efforts to tighten the screws on Wall Street and force firms to admit misdeeds have resulted in only a small number of arguably qualified successes.
Big multinational firms linked to the subprime mortgage debacle, and other notorious offenders escaped having to admit guilt despite her warnings.
For four decades, banks, investment funds, major corporations and financiers who cheated investors, paid bribes or destabilized markets through illegal practices knew they could resolve matters with the SEC while almost never having to admit wrongdoing.
Companies prefer to settle without admitting fault since that protects them from potentially devastating lawsuits. The practice also made defendants more cooperative, allowing the SEC to get quicker and more numerous results without having to go through lengthy trials.
But to a public hungry for accountability, and punishment for those seen as responsible for the 2008 global financial crisis, this easy out was unsatisfying.
And the agency already had faced stiff criticism for its failure to foresee the crisis or to detect egregious crimes like Bernard Madoff's gigantic Ponzi scheme.
- Only a few confess -
White vowed to send a strong message by seeking admissions in the worst cases -- those with many victims, that created the biggest risk to markets, or in which firms or individuals obstructed SEC investigations.
But the potential for high financial costs to those forced to admit wrongdoing made White's campaign tough to achieve in practice.
Still, SEC Enforcement director Andrew Ceresney defended her record and called the policy a success, saying it had resulted in admissions from almost 80 people and companies.
"Admissions result in additional accountability by the defendant that have enhanced deterrence in appropriate cases, while we still use 'no admit, no deny' settlements to eliminate litigation risk and obtain relief more expeditiously in most matters," he said in a statement to AFP.
But Urska Velikonja, a visiting law professor at Georgetown who has studied SEC enforcement, said the results have been a mixed bag.
Out of a sample of about 2,000 individuals or firms who settled with the SEC since the policy change, in cases filed between the 2012 and 2015 fiscal years, Velikonja found just 17 who admitted to offenses involving fraud, the kind of admission that can have the most serious legal ramifications.
And she did not find a single instance in which a publicly-traded company admitted to fraud.
The cases in which the SEC was able to win admissions were often more minor, Velikonja told the AFP. "They're probably also not the ones with the biggest numbers of victims."
"The most charitable reading" of White's goal, she said, "is this is an ideal. This is what we hope will happen. But getting there is hard."
- Making an effort? -
The SEC touts the high-profile admissions it was able to win from the financial sector: Merrill Lynch in June paid $415 million, admitting it misused customer cash to help generate profits. And a year ago, two units of JP Morgan Chase together settled for $267 million, after admitting they failed to inform clients of conflicts of interest.
But some very big fish avoided confessing: Steven Cohen, the hedge fund manager at the center of a sprawling, multi-agency insider trading investigation, settled in January without an admission.
And Morgan Stanley paid $275 million in 2014 but skated on whether it misled investors in subprime mortgage-backed securities at the heart of the financial crisis.
Velikonja gave the SEC credit for improving, and gradually winning more admissions. "They're making an effort and it seem to be getting easier."
As White and other SEC officials like Ceresney head for the exits, Velikonja said, while early signs suggested the incoming Trump administration was preparing to dismantle much of the Obama-era financial regulations, the policy on admissions could be popular enough to survive the transition. "This is one that might last," she said.
John Coffee, director of Columbia Law School's center on corporate governance, told AFP the SEC's results had not lived up to White's rhetoric, and many admissions lacked teeth.
"It is hard to change settled practices in Washington and the 'good old boys' in the private bar and the SEC have persisted in their ways," he said in an email.