Allowing a bank to pay a fine without admitting liability allows the SEC to avoid the uncertainty of a trial and preserves resources that can be used to pursue other securities law violators, Fickes said before Rakoff's opinion was released.

The SEC claimed that Citigroup misled investors in a $1 billion fund that included assets the bank had projected would lose money. At the same time it was selling the fund to investors, Citigroup took a short position in many of the underlying assets, according to the agency.

"If the allegations of the complaint are true, this is a very good deal for Citigroup," Rakoff wrote in today's opinion. "Even if they are untrue, it is a mild and modest cost of doing business."

Rakoff said he can't endorse the settlement based only on the unproved allegations in the SEC's complaint.

"The court has not been provided with any proven or admitted facts upon which to exercise even a modest degree of independent judgment," he said.

'Recidivist'

He rejected the SEC argument that he should defer to the agency's determination that the settlement is fair, particularly as it asked him to issue an order requiring Citigroup not to violate the securities laws in the future.

Calling Citigroup "a recidivist," Rakoff said the SEC hasn't tried to enforce such an order against a financial institution in the past 10 years.

"When a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are," he wrote.

The case is U.S. Securities and Exchange Commission v. Citigroup Global Markets Inc., 11-cv-7387, U.S. District Court, Southern District of New York (Manhattan).

First « 1 2 » Next