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From Securities Regulation Daily, August 5, 2014

Heeding Second Circuit, Judge Rakoff approves SEC-Citigroup settlement

By Jim Hamilton, J.D., LL.M.

The Second Circuit panel had ruled that it was an abuse of discretion for the district court to require that the SEC establish the “truth” of the allegations against a settling party as a condition for approving a consent decree settling an SEC enforcement action against Citigroup (SEC v. Citigroup Global Markets, Inc., August 5, 2014, Rakoff, J.).

Trials are primarily about the truth, said the panel, while consent decrees are primarily about pragmatism. Thus, the panel vacated the district court’s decision and remanded for consideration based on the panel’s ruling.

Settlement concerns. District Judge Rakoff feared that, as a result of the court of appeal's decision, the settlements by governmental regulatory bodies and enforced by the judiciary's contempt powers will in practice be subject to no meaningful oversight whatsoever. But he said it would be a dereliction of duty for the district court to seek to evade the dictates of the appeals panel. The court of appeals has fixed the menu, he noted, leaving the district court with “nothing but sour grapes.” Obeying an earlier ruling by a Second Circuit panel, a district court approved a settlement of an SEC enforcement action against Citigroup.

The case is No. 11-cv-7387.

MainStory: TopStory Enforcement NewYorkNews

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