The U.S. Securities and Exchange Commission appealed a federal judge’s decision to reject its proposed $285 million settlement with Citigroup.
The appeal, filed today in the US Court of Appeals in New York, challenged U.S. District Judge Jed Rakoff’s rejection last month of the settlement, which involved claims that Citigroup misled investors in a $1 billion financial product linked to risky mortgages. “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,” SEC Enforcement Director Khuzami said today in a statement.
Rakoff criticized the agency’s practice of resolving cases without requiring the subject of the allegations to admit wrongdoing. In his ruling, Rakoff said the settlement didn’t provide him with “any proven or admitted facts” to inform his judgment. Khuzami said the judge’s decision “is at odds with decades of court decisions that have upheld similar settlements.”. Rakoff’s approach “could in practical terms press the SEC to trial in many more instances, likely resulting in fewer cases overall and less money being returned to investors,” he said in the statement.