The Securities and Exchange Commission is defending [1] ($) a $75 million settlement agreement it struck with Citigroup for hiding from investors the extent of its subprime exposure. In a court filing, regulators maintained that the settlement, which was rejected last month by a federal judge, was “fair, reasonable, adequate, in the public interest and should be approved [2].”
Citigroup is accused of hiding exposure to more than $40 billion in subprime CDOs while telling investors in 2007 that it had reduced its subprime exposure [3] to $13 billion. Two Citi execs—former CFO Gary Crittenden and Arthur Tildesley, formerly the head of investor relations—were charged with making misstatements. (The two agreed to pay SEC fines but deny they did anything wrong.)
But when U.S. District Judge Ellen Huvelle rejected the settlement last month, she asked regulators to consider why more executives [4] weren’t also charged. (As we’ve noted, judges have increasingly challenged [5] regulators’ settlements with big banks and objected to the lenience of the penalties.) The SEC's original suit repeatedly referenced “senior management” who knew about Citi's subprime exposure. The judge told the SEC to name names.
Read on.
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