Consent Order

To resolve a State X proceeding, Fennwick Loch Securities signs a CONSENT ORDER under which it neither admits nor denies the Administrator's allegations, agrees to a censure, pays a sum, and undertakes to retain an independent compliance consultant. A year later the firm applies to register in State Y and its counsel proposes to answer "no" to a disclosure question asking whether any securities regulator has entered an order against the firm, reasoning that nothing was ever admitted or proved. Is that answer correct?

1. A.Yes, because the firm admitted nothing and no tribunal ever found the allegations proved.The disclosure question asks whether an order was entered, not whether allegations were admitted or adjudicated.
2. B.No. A consent order is a final order entered by a securities regulator and must be disclosed, whatever its admissions formula.Correct. The order exists and imposed sanctions; answering no would be a material misstatement in the application.
3. C.Yes, provided the firm voluntarily supplies the consent order to State Y as background rather than as a formal disclosure.Supplying it informally does not cure a false answer to a direct disclosure question.
4. D.No, but the omission is immaterial, since State Y can find the order on the public record itself.A regulator's ability to discover the truth elsewhere does not make a false application answer immaterial.

Why: No. A consent order is a FINAL ORDER of the Administrator. The "neither admits nor denies" formula governs the evidentiary use of the allegations, allowing the firm to settle without conceding the underlying facts and without creating admissions usable against it elsewhere. What that formula does not do is change the character of the instrument: an order was entered by a securities regulator, it imposed a censure, a payment and an undertaking, and it exists on the public record. Disclosure questions of this kind ask whether an order was entered, not whether misconduct was admitted or adjudicated. Answering "no" would be a material misstatement in a registration application, which is itself an independent ground for denial and a separate violation.

Facing a revocation proceeding, an agent negotiates a settlement: a 60-day suspension WITHOUT admitting or denying the findings. The Administrator may:

1. A.Accept it secretly with no public recordWrong. Orders are public records with disclosure consequences.
2. B.Never settle; every proceeding requires a full hearingWrong. Hearings are RIGHTS respondents may waive through settlement.
3. C.Accept it only with a full written admissionWrong-but-tempting. No-admit language is the settlement convention's heart.
4. D.Accept the consent order, which binds the agent like a litigated orderCorrect. Negotiated resolutions are standard and fully effective.

Why: Administrators routinely resolve proceedings through consent orders in which respondents neither admit nor deny findings; such orders are enforceable and reportable like litigated ones. Citation: administrative practice under Uniform Securities Act Sec. 204. Takeaway: no-admit settlements are lawful - and their consequences are real.