The US Appeal Court for the Second Circuit indicated there is a strong likelihood that Judge Rakoff’s decision would be reversed, according to the New York Law Journal.
Public interest
The issue centres on Judge Rakoff’s assessment that a settlement in the case – dealing with fraud claims around the sale of mortgage-backed securities -- was not in the public interest.
According to the Journal, in the November 2011 ruling, Judge Rakoff said the case was being settled for ‘pocket change’, with no admission of liability, and that it was hard to see ‘what the SEC is getting from this settlement other than a quick headline.’ The judge is reported to have gone on to state that he lacked the framework properly to asses the settlement, telling both parties: ‘The injunctive power of the judiciary is not a free-roving remedy to be invoked at the whim of a regulatory agency, even with consent of the regulated.’
Liability
Citigroup has argued that the settlement refusal did not take into account the fact that the bank might not have agreed to settle if it had to admit liability publicly, that the SEC might lose a trial or that ‘Citigroup perhaps did not mislead investors’.
The appeal judges stayed judge Rakoff’s decision while the circuit considers Citibank and SEC appeals.
Public interest
The issue centres on Judge Rakoff’s assessment that a settlement in the case – dealing with fraud claims around the sale of mortgage-backed securities -- was not in the public interest.
According to the Journal, in the November 2011 ruling, Judge Rakoff said the case was being settled for ‘pocket change’, with no admission of liability, and that it was hard to see ‘what the SEC is getting from this settlement other than a quick headline.’ The judge is reported to have gone on to state that he lacked the framework properly to asses the settlement, telling both parties: ‘The injunctive power of the judiciary is not a free-roving remedy to be invoked at the whim of a regulatory agency, even with consent of the regulated.’
Liability
Citigroup has argued that the settlement refusal did not take into account the fact that the bank might not have agreed to settle if it had to admit liability publicly, that the SEC might lose a trial or that ‘Citigroup perhaps did not mislead investors’.
The appeal judges stayed judge Rakoff’s decision while the circuit considers Citibank and SEC appeals.
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