Connecticut-based hedge fund Deccan Value Investors has publicly rejected findings made by the US Securities and Exchange Commission (SEC) in a 2022 enforcement action, becoming one of the first investment firms to challenge a settled case following the regulator’s decision to abandon its long-standing “gag rule”, according to a report by Bloomberg.
The Greenwich-based manager said it “categorically rejects” the SEC’s conclusions that it breached fiduciary duties owed to two university endowments, despite agreeing to settle the case four years ago without admitting or denying the regulator’s allegations.
In a statement, Deccan said it continues to believe it acted lawfully and in good faith, maintaining that its conduct was consistent with its obligations to investors. The firm added that it chose to settle the case to avoid the costs and disruption associated with prolonged litigation rather than as an admission of wrongdoing.
Founded by Vinit Bodas, Deccan was previously prevented from publicly disputing the SEC’s findings under the agency’s long-standing policy requiring settling parties to refrain from denying allegations contained in settlement orders.
That restriction was removed in May, when the SEC rescinded the decades-old policy, opening the door for firms and individuals that previously settled enforcement actions to publicly contest the regulator’s conclusions.
The SEC reportedly declined to comment on Deccan’s statements.
The policy, formally known as the SEC’s “no admit, no deny” settlement framework, was introduced in 1972 and had been defended by the regulator as a means of preventing confusion over settlements reached without admissions of liability. Critics, however, argued that the rule effectively prevented defendants from publicly presenting their version of events and raised concerns over free speech protections.
Legal observers expect Deccan may be the first of several hedge funds and investment firms to revisit settled SEC enforcement cases following the policy change. Lawyers involved in challenging the rule have indicated that other firms are considering making public statements now that the restrictions have been lifted.
For the hedge fund industry, the change could alter how firms approach regulatory settlements in future enforcement actions. While settling with the SEC remains an attractive way to avoid lengthy and costly litigation, firms now have greater freedom to defend their reputations publicly after agreements have been finalised.
