Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, August 21, 2012

In Support of Judge Rakoff

Last week I filed, on behalf of a group of securities law scholars, an amicus brief in SEC v. Citigroup Global Markets Inc., in support of the district court's order that refused to approve the proposed settlement between the parties.  In the brief we express our concern about the SEC's settlement practices and the constraints on judicial discretion in approving consent settlements advocated by the parties, which, if adopted by the Second Circuit, will reduce the effectiveness of judicial review as an independent check on agency action. (Download Citigroup AmicusBrief Aug 15)

In addition, yesterday Harvey Pitt, who has served both as SEC Chairman and as its General Counsel, filed an amicus brief in support of Judge Rakoff's order.  Mr. Pitt asserts that the Commmission applies exacting standards before it approves the filing  or settlement of an enforcement action and therefore its attorneys should have no difficulty supplying the court with the information it needs in order to review the proposed consent judgment.  The questions posed by the district court, if answered, would have enabled the court to approve the settlement.  (Download Pitt.AmicusBrief)

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Both Briefs have identical prayer - that the Order denying entry of the Consent Settlement be affirmed. However, the Black Brief seems to implicate the very process by which the SEC in general goes about fashioning settlements, without getting acknowledgement of ANY facts, a superficial remedial programme and insignificant penalties. So this case, on this view, is only an instance of a large scale, systemic problem with the Settlement process. On the other hand, the Pitt Brief seems to suggest that as a matter of policy and practice, the SEC conducts an internal analysis which is at least as rigorous as the District Court sought in this case, so the SEC should have no difficulty in turning over the facts and its analysis to the Court. On this reading, the SEC's stance in this case is rather unusual, and not in line with the usual practice, so this case is an aberration, rather than the practice.

I sense some tension between the two briefs, in spite of the identical end result these seek in the particular case. Any thoughts?

Posted by: Mangesh Patwardhan | Aug 22, 2012 8:18:37 PM

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