The Securities and Exchange Commission has agreed not to let accusations of LIBOR manipulation lead to the revocation of Deutsche Bank’s well-known seasoned issuer status, a streamlined process for issuing securities that large firms enjoy. The decision was detailed in a no-action letter issued on Monday.

Last month, Deutsche Bank and a U.K. subsidiary, DB Group Services, pleaded guilty to wire fraud for their role in manipulating the London Interbank Offered Rate, agreeing to pay $775 million in criminal penalties to the Department of Justice. That brought the total amount of penalties against the bank to $2.5 billion following similar settlements with the Commodity Futures Trading Commission, New York’s Department of Financial Services, and the U.K. Financial Conduct Authority. From 2003 through early 2011, numerous Deutsche Bank derivatives traders engaged in various schemes to move benchmark rates in a direction favorable to their trading positions.

Lacking a waiver from the SEC, this illegal activity would trigger the automatic “bad actor” revocation of Deutsche Bank’s WKSI status under Rule 506 of the Exchange Act, a costly punishment. WKSIs are granted nearly instant access to investors through the capital markets, enjoy greater flexibility in their public communications, and have a streamlined registration process with less oversight. A WKSI issuer, for example, does not have to wait for the Division of Corporation Finance to review and declare a registration statement effective prior to selling financial products to investors.

The SEC’s approach to WKSI waivers has led to strife among commissioners, with a debate over whether misconduct unrelated to securities sold to investors should trigger a WKSI ban, or if doing so is an ill-advised enforcement tool contrary to the interests of investors. It was this controversy that led to a majority of the full Commission agreeing to the waiver, rather than leaving the decision in the hands of the Division of Corporation Finance

The decision rankled the Commission’s most outspoken waiver critic. “With these advantages comes a modicum of responsibility,” Commissioner Kara Stein said in a statement. “WKSIs must meet the very low hurdle of not being ineligible. This means that, among other things, they have not been convicted of certain felonies or misdemeanors within the past three years. In granting this waiver, the Commission continues to erode even this lowest of hurdles for large companies, while small and mid-sized businesses appear to face different treatment.”

Deutsche Bank’s illegal conduct “involved nearly a decade of lying, cheating, and stealing” and “was pervasive and widespread,” she said.

Also, Stein added, Deutsche Bank “is a recidivist, and its past conduct undermines its current promise of future good conduct.” Since 2004, it has, among other violations, a criminal admission of wrongdoing connected to promoting tax shelters, a settlement involving misleading investors about auction rate securities, and a violation against its investment bank for improperly asserting influence over research analysts. Deutsche Bank has nevertheless requested, and received, three WKSI waivers in eight years.  “It is safe to assume that these waiver requests will continue to roll in, as issuers are now emboldened by an unofficial Commission policy to overlook widespread and serious criminal conduct,” she said.

Stein also blasted the CFTC for a perceived effort to bypass the SEC’s authority and preserve Deutsche Bank’s WKSI status. That agency’s settlement included language that a bad actor disqualification “should not arise as a consequence of this order.”

“The CFTC saw fit to opine on the SEC’s Rule 506 jurisprudence about whether Deutsche Bank should receive a waiver from automatic disqualification under SEC rules,” Stein said. “It is unclear to me what, if any, analysis went into this decision and what prompted the CFTC to insert [this] language into its final order.  The implications of the CFTC’s actions here are deeply troubling. The Commission should closely review this provision and how it is being used.”

For its part, Deutsche Bank argued that none of the LIBOR-related conduct underlying the plea agreement pertains to its role as an issuer of securities. “The Department of Justice did not conclude that the directors or senior officers of Deutsche Bank engaged in any deliberate misconduct or were aware of violative conduct or ignored any warning signs or ‘red flags’ regarding the conduct,” its request for a waiver said, citing “extensive steps to remediate the misconduct and strengthen its compliance and internal control standards.”

The SEC’s waiver concluded that the bank “has made a showing of good cause,” making it contingent on the bank fulfilling the terms of the Department of Justice plea agreement.