SEC-Citigroup Mortgage Bond Trial Delayed by Appeals Court

In was revealed on Thursday afternoon that a federal appeals court has voiced concerns over a lower court's decision to reject a $285 million civil settlement in 2011 between the U.S. Securities and Exchange Commission and Citigroup (NYSE: C).That decision delayed a civil fraud trial, expected to begin this coming July.According to the Wall Street Journal, the U.S. Second Circuit Court of Appeals said on Thursday that the Citigroup case “raises important questions,” and that it would be looking to determine whether the judge overstepped his authority when rejecting the deal.It was last year that the district judge rejected the settlement, an amount deemed fair by most onlookers. He apparently objected to the practice by the SEC allowing Citi to neither admit or deny wrongdoing.The case was based around the fact that the SEC accused Citigroup of selling investors slices of a $1 billion mortgage-bond deal called Class V Funding III. However, it did not disclose that it was betting against $500 million of those assets.According to the appeals court, the judge seemed to be under the impression that the SEC had “a readily available option to obtain a judgment that established Citigroup's liability, either by trial or settlement, but chose for no good reason to settle for less.”"A still more significant problem is that the court does not appear to have given deference to the S.E.C.'s judgment on wholly discretionary matters of policy," the appeals court said. "The district court believed it was a bad policy, which disserved the public interest, for the S.E.C. to allow Citigroup to settle on terms that did not establish its liability. It is not, however, the proper function of federal courts to dictate policy to executive administrative agencies."