SEC and Congress React to Court’s Blocked Citigroup / SEC Settlement

U.S. House Financial Services Committee hearing

There have been a couple of significant reactions to the court’s refusal to accept the recent $285 million proposed settlement between the U.S. Securities and Exchange Commission and Citigroup, which challenged the practice of the SEC of entering into settlements where the defendants neither admit nor deny the charges.

1. SEC Announces an Appeal

First, the SEC announced that it is appealing the decision based on its belief that the Judge committed, “legal error by announcing a new and unprecedented standard that inadvertently harms investors.” Them’s fighting words!

The Commission is no doubt correct in its realistic assessment of the likely outcome of changing its settlement practices in that, “…the new standard adopted by the court 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.” But many would view this as the right and reasoned outcome. Others might also point out that while all settlements are paid by companies (and individual defendants in some cases), not all of the monies recovered by the SEC or charged as penalties go back to investors.

2. Congress Plans a Hearing

Secondly, Congress is getting into the act. The Financial Services Committee has announced that it is going to hold a hearing next year to examine the SEC’s practice of settling cases with defendants that neither admit nor deny complaints made by the SEC.  Like “don’t ask, don’t tell,” this practice may have exceeded its shelf life.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
Categories: Directors & Officers, Financial Services | Tags: ,

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