Citigroup and SEC Defend Proposed Settlement

On November 7, 2011, Citigroup Global Markets Inc. and the Securities and Exchange Commission filed separate memorandums in support of their proposed settlement agreement in the United Stated District Court for the Southern District of New York. Citigroup and the SEC agreed to a settlement over allegations of wrongdoing by Citigroup’s mortgage-backed securities group wherein Citigroup agreed to pay $285 million in exchange for a “no admit, no deny” settlement. Judge Jed S. Rakoff ordered both parties to defend the proposed settlement after questioning the SEC’s decision to accept a non-admission of wrongdoing despite “alleg[ing] a serious securities fraud.” Citigroup defended the settlement in part by arguing that the public interest is better served by allowing sophisticated parties to compromise complicated matters in a manner that avoids wasteful litigation and exposing both parties to extreme results. It also argued that current market conditions penalize corporate stock prices simply because of a company’s involvement in litigation with a regulatory agency, and that a “no admit, no deny” result was necessary to minimize potential collateral consequences in the civil class actions and other litigations pending against Citigroup related to mortgage-backed securities and subprime mortgages. The SEC defended the settlement by stating that the outcome allowed for a quick resolution to the case while still “clearly conveying” that the alleged conduct by Citigroup occurred. Citigroup Submission. SEC Submission.