SEC to appeal Citi settlement ruling
When Judge Jed Rakoff rejected the SEC's $285 million settlement with Citigroup over dubious CDO practices, people groaned, "here we go again."
We thought the drama would play out roughly similar to the way it played out when the same judge rejected the SEC's settlement with Bank of America. In that case, the SEC and Bank of America went back to the drawing board and struck a new deal, sweetening the pot for the sake of the judge. Judge Rakoff eventually accepted the deal, which called for more penalties, albeit with lingering reservations. But the judge was able to make his points about the value and logic of SEC settlements, which of course do not require the target to admit any guilt whatsoever.
In the case of the SEC-Citigroup deal, we thought the two parties would likewise re-do the settlement and get it approved, allowing the judge to once again mount the pulpit and make his points. But the SEC has thrown us all a curve ball and has escalated the issue by announcing that it will appeal Judge Rakoff's decision to an appellate panel. My sense is that the SEC would have liked to re-do the settlement, but perhaps Citigroup refused to play ball.
In any case, the SEC's move to appeal raises the stakes because, as the Washington Post notes, if the panel rejects the SEC's claims, then the judge's decision becomes "the legal standard for other judges in the judicial circuit that encompasses Manhattan and much of the regulatory agency's corporate and Wall Street litigation." The next step for the SEC would be to appeal to the Supreme Court, which as shown itself to be very business friendly.
- here's a Washington Post article