Court Challenges SEC’s Policy of Allowing Settling Parties to “Neither Admit nor Deny” Agency Allegations

December 12, 2011
The long-standing policy of the Securities and Exchange Commission to settle cases by allowing a party to neither admit nor deny the agency’s allegations has been challenged by United States District Court Judge Jed S. Rakoff, sitting in the Southern District of New York. Judge Rakoff rejected a proposed $285 million settlement between the SEC and Citigroup Global Markets, Inc., ruling that, because the proposed Consent Judgment lacked any proven or acknowledged facts, the court could not determine whether it was fair, reasonable, adequate and in the public interest. This update examines Judge Rakoff’s ruling, which presents a new obstacle to settling cases brought by the SEC that require federal court approval.