Second Circuit upholds broad SEC settlement powers — for potential defendants, three key points

By Deborah R Meshulam

The US Court of Appeals for the Second Circuit has found that Judge Jed S Rakoff of the District Court for the Southern District of New York abused his discretion in refusing to approve a settlement between the Securities and Exchange Commission (SEC) and Citigroup Global Markets.

In its decision, issued on 4 June, the appellate court endorsed broad SEC discretionary powers to make charging decisions and reach settlements with those whom it sues. The decision also includes language supportive of SEC authority to avoid resort to the courts and to use its internal administrative processes.

As outlined in this alert, those who are regulated by the SEC (or any other government agency) should consider carefully the potential consequences of the Second Circuit’s broad endorsement of SEC power…

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