Within hours of being slapped with unprecedented criminal guilty pleas Wednesday, four major banks got a little something to take the pain away -- courtesy of the Securities and Exchange Commission. In proceedings arranged before settlements were announced, the agency granted the banks a raft of regulatory waivers, allowing the institutions to continue operating largely as usual.

But the waivers, which were seen as a necessary inducement for the banks to accept guilty pleas, have divided the SEC. In a blistering dissent, Democratic Commissioner Kara Stein wrote that continually exempting financial institutions from automatic penalties bolstered the too-big-to-bar status of major banks.

“Allowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored,” wrote Stein, one of five SEC commissioners.

JPMorgan Chase, Citigroup, and British banks Barclays and Royal Bank of Scotland pleaded guilty Wednesday to Justice Department charges of antitrust violations related to manipulation of the foreign exchange market. UBS agreed to a settlement and pleaded guilty to charges related to the previous Libor scandal. In sum, the banks paid fines that exceeded $5.7 billion.

All five banks received waivers of some kind, totaling 12 among the five banks and their various subsidiaries. The most important waiver allowed the firms to continue operating as “well-known seasoned issuers.” So-called WKSI status, which lets banks issue securities with minimal oversight, can be automatically revoked for firms that violate federal anti-fraud laws.

But errant megabanks have virtually never faced those penalties thanks to the SEC’s ability to issue waivers. In all, the five institutions named in Wednesday’s foreign exchange settlements have received 23 WKSI waivers. It was the fifth for Citigroup, the sixth for JPMorgan, and the seventh for UBS -- and that doesn’t include other waivers.

Stein has long been a thorn in the side of banks and her fellow commissioners when it comes to waivers, but her recent dissent is perhaps her most stinging, reflecting the increasingly tense political divisions at the SEC. The most vocal of the current commissioners, Stein has reportedly clashed with SEC Chair Mary Jo White, Bloomberg has reported, going so far as to ban White's chief of staff from entering her office. 

Stein was particularly incensed that the the recent round of clemency came so soon after settlements in the Libor affair, which saw many of the same banks involved in a scheme to rig a global benchmark interest rate. That these same firm were caught rigging currency markets so soon after Libor came to light, Stein wrote, indicates that Wall Street culture hasn’t improved.

“We have the tools, and with the tools the responsibility, to empower those at the top of these institutions to create meaningful cultural shifts, yet we refuse to use them,” Stein wrote.

Some in the enforcement community, however, see the waivers as a necessary tool. Waivers are “easy to rail against, hard to do something about,” said Paul Huey-Burns, a securities defense attorney who served at the SEC for over a decade, in an email. “If the government were to refuse to grant waivers, cases wouldn’t settle and fines in settled cases would be lower.”

Moreover, the offenses that the banks allegedly committed have come largely in lines of business unrelated to the privileges granted by the waivers. Waivers that allowed JPMorgan, Barclays and UBS to retain “safe harbor” status, for instance, let the banks continue to issue forward-looking statements without fear of being hit with a class-action lawsuit. These activities have little overlap with the $5.3 trillion-a-day foreign exchange market, where traders from multiple banks allegedly colluded to rig prices.

To Stein, however, the penalties serve a more pointed purpose: showing banks that the SEC can bite as well as bark.

“It is troubling enough to consistently grant waivers for criminal misconduct,” Stein wrote. “It is an order of magnitude more troubling to refuse to enforce our own explicit requirements for such waivers.”