The Securities and Exchange Commission on Tuesday was granted a two-week delay until mid-January in its securities fraud case against Citigroup as it seeks to have a judge’s decision to toss its settlement with the bank reversed.
The agency has criticized the judge’s decision, saying that it will subject it to undue hardship to have to bring such cases to trial, and is hoping to win an even longer delay so that it can pursue an expedited appeal of the ruling. The case centers around whether Citigorup misled investors in a $1 billion vehicle that involved risky mortgages.
As previously reported by AdvisorOne.com, Judge Jed S. Rakoff had rejected the SEC’s arrangement with Citigroup, saying in his decision that because the SEC did not compel Citigroup to either admit or deny its allegations, it was impossible for him to determine whether the amount of the settlement, $285 million, was fair. He also criticized the amount as “pocket change” and said that the current policy of the SEC not to require an admission of wrongdoing created a substantial potential for abuse.
Reuters reported that the agency, in turn, has called Rakoff’s decision a “legal error” that did not follow decades of precedent in court decisions allowing such settlements; the SEC further said that such decisions allowed investors to have faster recoveries and that the Rakoff ruling could affect the agency’s ability to reach similar accords with other companies.
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In its Tuesday morning filing with the 2nd U.S. Circuit Court of Appeals, the SEC said the urgency to put the case on hold came after Rakoff in a teleconference this month told Citigroup to answer the charges by Jan. 3, which is 27 days sooner than federal rules require. An answer could force Citigroup to deny some or all of the SEC allegations, or seek to have the case dismissed.