On June 4, the U.S. Court of Appeals for the Second Circuit
vacated a November 28, 2011, decision of the U.S.
District Court for the Southern District of New York in which the
district court declined to approve a settlement of claims that the
SEC brought against Citigroup Global Markets Inc. The SEC
alleged that Citigroup had negligently misrepresented its role and
economic interest in selecting RMBS to be included in the pool of
reference obligations in respect of a billion-dollar synthetic CDO
transaction. The lower court critiqued the SEC's practice
of settling enforcement actions without requiring defendants to
admit fault. The Second Circuit held that the court's
role in approving an SEC settlement is limited to determining
whether there is a factual basis to support the proposed consent
judgment, that the judgment is fair and reasonable, and, if
injunctive relief is imposed by the judgment, that the public
interest would not be disserved. The appellate court
