The United States Court of Appeals for the Second Circuit, in a much anticipated opinion, overturned a 2011 decision written by Judge Jed S. Rakoff to reject an SEC settlement with Citigroup.
Judge Rakoff’s controversial decision criticized the SEC for settling an enforcement case without requiring an admission of guilt. Soon after the decision, the SEC signaled that it would require admissions of guilt when settling certain cases, setting off fears of an increase in litigation as firms facing enforcement charges no longer have an incentive to settle without admitting or denying guilt.
Andrew Ceresney, the SEC’s Director of the Division of Enforcement, quickly praised the Second Circuit’s June 2, 2014 opinion, stating that it reaffirmed “the significant deference accorded to the SEC in determining whether to settle with parties and on what terms.”
But Ceresney’s statement may be a tacit admission that Judge Rakoff’s overturned decision may already have irrevocably achieved its purpose: the SEC will “continue to seek admissions in appropriate cases.” At least the choice of whether to obtain an admission of guilt will belong to the SEC, not the federal courts.