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The SEC took three unusual steps this week. First, in a high stakes move,
the agency appealed the refusal of Judge Rakoff to approve its proposed settlement
in a market crisis case with Citigroup. A loss in the Second Circuit could
substantially injure the enforcement program. Second, the agency brought an
action against SIPIC for failing to institute liquidation proceedings with
respect to the Stanford Ponzi scheme. Finally, the SEC brought an action
against a private company claiming that it defrauded employees who sold shares
in their company back to their employer.
SEC v. Citigroup Global Markets, Inc. Case No. 11 Civ 7387 (S.D.N.Y.):
The Commission appealed the determination by District Court Judge Rakoff to not
approve the proposed settlement in this case. The underlying action is the
Commission's latest market crisis case which is discussed here. Judge Rakoff
declined to approve the proposed settlement noting that he did not have
sufficient facts on which evaluate the matter. While the Court was critical in
its order regarding the fact that the settlement was based on neither admitting
nor denying the allegations in the complaint, central to the Court's conclusion
was its view that there was a fundamental mismatch between the allegations of
the complaint which alleged an intentional fraud and its charging sections
which were based on negligence and the proposed settlement which was bassed on
a small fine when viewed in the context of similar cases without offering any
explanation for the apparent mismatch. In proceedings before Judge Rakoff the
Commission chose not to offer an explanation. Rather, it argued essentially
that the Court had a limited role and should defer to the decision of the
SEC v. Securities Investor Protection Corporation:The Commission
filed an application to compel SIPIC to begin the liquidation of accounts
related to the Stanford Group Company. Previously, the SEC filed an action
against Mr. Stanford and his companies. In that proceeding the court ordered
that Stanford Group be placed into receivership. Despite a request from the
Commission that SIPIC initiate a liquidation in view of the customer accounts
involved, it failed to take action The application is pending.
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For more cutting edge commentary on developing securities issues, visit
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