On March 15, the U.S. Court of Appeals for the Second Circuit issued a stay of proceedings in a case brought against Citigroup Global Markets Inc. by the Securities and Exchange Commission. The SEC's complaint against Citigroup for negligent misrepresentation related to the company's marketing of collateralized debt obligations (CDOs) and followed an industry-wide investigation into the recent financial crisis.
The SEC had asked for the stay of proceedings after the district court refused to approve the proposed consent judgment that contained no admission of liability. The district court had rejected the settlement based in part on the rationale that a consent judgment without an admission of liability was bad policy and failed to serve the public interest.
In granting the stay, the Second Circuit found a strong likelihood that the district court's ruling would be overturned. The Second Circuit took particular issue with the district court's lack of deference towards the SEC's judgment on discretionary matters of policy.
The ruling may be of particular interest to Canadian regulation-watchers in light of the fact that the OSC is currently considering adopting new enforcement tools, including "no-contest" settlements.
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