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SEC Appeals Citigroup Ruling; Congressional Committee to Hold Related Hearing

The SEC has appealed a federal district court ruling that threw out a proposed settlement with Citigroup.  The proposed settlement stated that Citigroup neither admitted nor denied the SEC allegations.  Largely due to this language, federal district court Judge Rakoff refused to approve the consent judgment stating that it was "neither fair, nor reasonable, nor adequate, nor in the public interest."  The SEC's Division of Enforcement Director made the following statements regarding the appeal:

We believe the district court committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits. . . . The court's new standard is at odds with decades of court decisions that have upheld similar settlements by federal and state agencies across the country. In fact, courts have routinely approved settlements in which a defendant does not admit or even expressly denies liability, exactly because of the benefits that settlements provide.

The House Financial Services Committee has also announced that it will hold a hearing next year to examine the practice by the SEC of settling cases with defendants that neither admit nor deny complaints made by the SEC.  The timing of the hearing, as well as a list of witnesses, will be announced at a later date.