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Remember when federal Judge Jed Rakoff scared the bejesus out of Wall Street in 2011? That's when he refused to sign off on a $285-million civil settlement between Citigroup (C) and the Securities and Exchange Commission over a massive mortgage fraud case.

Judge Rakoff balked at the logic of the settlement because Citigroup was not required to admit its misconduct. He called the payment "pocket change" and the SEC's result "half-baked justice."

It appears that, perhaps -- just perhaps -- the SEC and its new chief Mary Jo White have gotten the Judge's message.

In a policy shift, SEC Chair Mary Jo White announced this month that the Commission will no longer give free passes to companies like Citigroup in the cases it settles. That was the longstanding policy that annoyed Judge Rakoff and so many others to no end. The SEC justified the policy by arguing that it was still exacting punishment while conserving the resources that would be needed to actually try the cases it brought against the big banks it believed had defrauded investors.

According to the Wall Street Journal: "The new policy, which came out of a review Ms. White began when she joined the agency in the spring, will be applied in 'cases where… it's very important to have that public acknowledgement (of wrongdoing) and accountability.'"

The Journal further reported that "decisions will be made on a 'case-by-case' basis," according to the report by Jean Eaglesham and Andrew Ackerman. But White "added the agency intends to target cases of egregious intentional conduct or widespread harm to investors." Most cases still will be allowed to settle using the standard "'neither admit nor deny' formula," according to the Journal.

What the Journal article fails to delineate, however, is a policy framework through which the SEC will decide which types of cases will get the new treatment. Investors who have been victimized by stock fraud or other types of fraud that are disturbingly commonplace on Wall Street deserve to know what type of case meets this new standard. Will the Commission finally take the gloves off with Citigroup , Morgan Stanley (MS), Goldman Sachs (GS), UBS (UBS), JPMorgan (JPM) and other ""too big to fail" (and apparently "too big to jail") firms that issued and traded the destructive mortgage-backed securities, derivatives and other "financially engineered" products that almost destroyed the global economy?

This new policy -- we are told -- will foster the "interest of public accountability" of Wall Street and deter fraud.

This is sweet music to the ears of investors who are fed up with the Feds giving much of Wall Street a free pass for its inherently financially destructive nature.

Still, we wonder if the SEC will really require a big bank like JPMorgan to admit its illegal conduct the next time around.

Next month's SEC trial of the 29-year-old former low level Goldman Sachs trader "Fabulous Fab" is a prime example of how the SEC's focus has been on the small fry and not the big fish.

In Fab's case, he is going to trial for what Senator Levin famously cited from a Goldman email was "one $%&!" mortgage securities deal. Goldman settled in 2010 for $550 million without admitting its wrongdoing, while Fab faces the music.

Pushing low-level Wall Street managers and traders like Fab to admit their misconduct is all well and good, as long as the SEC shows it has the guts to push Wall Street banks to do the same. We will applaud the Commission when it shows that courage. Until then, our fingers are crossed!

Disclaimer:Zamansky & Associates are stock fraud attorneys representing investors in arbitration and litigation against financial institutions, including Citigroup, Morgan Stanley, Goldman Sachs, UBS and JPMorgan Chase.

Zamansky and Associates represents investors in arbitration cases against UBS regarding the sale of Lehman Brothers Structured Products.

Source: The SEC Says It Wants Big Banks To Admit Guilt, But Doubts Remain