Second Circuit Limits Scope of Judicial Review of SEC Settlement Agreements, Clearing the Way for SEC-Citigroup Consent Decree: Appeals Court Vacates District Court’s Refusal to Approve SEC-Citigroup Settlement and Articulates a Standard of Broad Deference to the SEC in Settling Charges

Sullivan & Cromwell LLP - June 5, 2014

In SEC v. Citigroup Global Markets, Inc., a panel of the U.S. Court of Appeals for the Second Circuit ruled yesterday that a federal district court abused its discretion when it declined to approve a 2011 settlement agreement between the SEC and Citigroup. The appeals court held that it was impermissible for the district court to require the SEC to establish the “truth” of the SEC’s allegations as a condition of the proposed settlement. It also emphasized that the agency—rather than the district court—is the authority principally charged with ensuring that a consent decree best serves the public interest, and thus the SEC’s public-interest determination “merits significant deference.”  The decision grants the SEC, and likely other government regulatory agencies, broad discretion to decide how best to settle cases and limits federal courts’ authority to engage in significant fact-finding or to review the adequacy of the terms of settlement when analyzing consent decrees.