Fifth Circuit Upholds SEC's Uneven Off-Channel Communication Settlements
A company that settled early in the SEC's enforcement sweep over off-channel communications is not entitled to a modification just because the agency later offered more lenient terms to other firms, the Fifth Circuit has ruled.
The U.S. Court of Appeals for the Fifth Circuit rejected a challenge from Apex Clearing Corp. after the SEC refused to modify a 2024 settlement. Apex was part of the SEC's industry sweep targeting failures to preserve off-channel business communications. The firm paid a $6 million penalty and agreed to retain an independent compliance consultant. Five months later, the SEC settled with other firms for similar violations on more favorable terms that did not require the same undertakings. Apex requested that its settlement be amended for equitable treatment, but the SEC denied the request.
The Fifth Circuit affirmed the SEC's decision, holding that the agency was not required to retroactively extend more favorable terms. The court acknowledged the disparity but noted that Apex had voluntarily agreed to the terms and that subsequent, better deals for other firms did not constitute the "extraordinary circumstances" needed to reopen a final settlement. The ruling is a critical reminder for counsel that SEC settlements are final. Firms must carefully weigh the terms of any proposed settlement against all risks, including the possibility that the agency’s enforcement posture may soften in the future.