SEC appeals judge’s rejection of its settlement with Citigroup

The Securities and Exchange Commission is appealing a judge’s rejection of the regulator’s $285-million civil securities fraud settlement with Citigroup Inc., according to court papers filed Thursday.

The pact was rejected by U.S. District Judge Jed Rakoff last month as “pocket change” for Citigroup. In that ruling, the judge criticized the SEC’s policy of settling lawsuits without having defendants admit or deny wrongdoing.

The SEC said in a statement that it believes Rakoff erred “by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits.”

Such appeals are unusual for the regulator, which is used to hammering out deals with defendants and having them approved by judges.

Rakoff’s Nov. 28 ruling threw out a deal over the sale of toxic mortgage debt. The judge wrote at the time that the settlement was “neither reasonable, nor fair, nor adequate, nor in the public interest.” He set a trial date of July 16.

The SEC’s challenge will be reviewed by the 2nd U.S. Circuit Court of Appeals in New York. That could delay the trial.

Citigroup also disagreed with the judge’s ruling. In a statement Thursday, the bank said it believes that the settlement “fully complies with long-established legal standards. In the event the case is tried, we would present substantial factual and legal defenses to the charges.”