Professor Joseph Grundfest spoke with The Wall Street Journal's Juliet Chung on hedge-fund manager Philip Falcone’s civil settlement with the SEC  and why the significance of it depends on the consequences of his admission.

 Hedge-fund manager Philip Falcone admitted wrongdoing as part of a civil settlement with securities regulators, a landmark in the government's new drive to push defendants to acknowledge their bad behavior.

As part of the settlement, disclosed Monday, Mr. Falcone and his hedge-fund firm, Harbinger Capital Partners, will pay more than $18 million and Mr. Falcone will be banned from the securities industry for at least five years.

Securities and Exchange Commission Chairman Mary Jo White said after taking office earlier this year that she wanted more defendants to have to admit wrongdoing. Monday's civil settlement marks the first time an individual or firm has made such an admission in a deal with the SEC, except in cases where they had previously pleaded guilty in a criminal proceeding or been criminally convicted.

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“This is a first for the SEC, and everyone tends to remember their first time,” said Joseph Grundfest, a law and business professor at Stanford University and a former SEC commissioner, of the wrongdoing language.

But he said the significance of the settlement depends in part on the admission's consequences. “How much more will Falcone have to pay to resolve related lawsuits because of the admissions? We don't have those data,” he said.