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Tatiana Rodriguez | Bloomberg Law
SEC Press Release No. PR-2011-265 (Dec. 15, 2011)The Securities and Exchange Commission (SEC) filed an appeal in SEC v. Citigroup Global Markets Inc. with the U.S. Court of Appeals for the Second Circuit, challenging Federal District Judge Jed S. Rakoff's well-publicized recent rejection of a $258 million settlement agreement between the SEC and Citigroup Global Markets Inc. (Citigroup). The case involves the SEC's allegations that Citigroup negligently made misrepresentations in connection with the sale of collateral debt obligations. The Director of the SEC's Division of Enforcement, Robert Khuzami, issued a statement elaborating on the SEC’s reasons for filing the appeal. He stated that the SEC believes the district court made a "legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits." Further, the SEC believes that the court was "incorrect in requiring an admission of facts—or a trial—as a condition of approving a proposed consent judgment." Khuzami explained that the new standard adopted by the court is at odds with decades of precedent upholding similar agency settlements. Moreover, it would force the SEC into more trials, which in turn, would compel the agency to allocate resources away from new investigations, resulting in fewer cases and fewer recoveries by the SEC. Khuzami further explained that settlement allows the SEC to avert the "twin risks of losing at trial or winning but recovering less than the settlement amount." He noted, however, that the SEC will move forward with trial where a settlement does not constitute the best outcome for investors. He provided the following information with respect to the SEC's core financial credit cases:
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