In March 2013, the SEC requested that Judge Victor Marrero of the United States District Court for the Southern District of New York approve consent judgments as to CR Intrinsic and CR Intrinsic Investments, LLC; S.A.C. Capital Advisors, LLC; S.A.C. Capital Associates, LLC; S.A.C. International Equities, LLC; and S.A.C. Select Fund, LLC (the “Relief Defendants”). Each of the proposed judgments was without admitting or denying the allegations of the SEC’s complaint. In April 2013, Judge Marrero issued an Opinion and Order in which he said, “The Court is troubled by these provisions as they permit CR Intrinsic and the Relief Defendants to resolve the serious allegations against hem involving a massive insider trading scheme ‘without admitting or denying the allegations of the Complaint.’” SEC v. CR Intrinsic Investors, LLC, 939 F. Supp. 2d 431, 436 (S.D.N.Y. 2013). Noting that the Second Circuit was then considering an appeal in SEC v. Citigroup Markets, Inc., which might clarify how much discretion the district courts might have in determining whether to approve or reject a consent judgment that contains a clause neither admitting nor denying the allegations in the SEC’s complaint, Judge Marrero conditionally approved the judgments pending resolution of Citigroup.

As explained in our June 6, 2014 post titled “Second Circuit Vacates Judge Rakoff’s Order Refusing to Approve Citigroup “Neither Admit Nor Deny” Settlement“, the Second Circuit recently clarified the proper standard for reviewing consent decrees, and the parties requested the court to approve consent decrees. Applying the standards set forth by the Second Circuit in SEC v. Citigroup Mkts., Inc., ___ F.3d ___, Docket Nos. 11-5227-cv; 11‑5375-cv; 11-5242-cv, 2014 WL 2486793 (2d Cir. June 4, 2014), Judge Marrero approved the judgments as to CR Intrinsic and the Relief Defendants. He, however, noted that the subsequent conviction of Matthew Martoma, a CR Intrinsic employee, and guilty plea by CR Intrinsic “called attention to the importance of more rigorous inquiry by the SEC in its application of ‘neither admit nor deny’ provisions in settlements embodying the exceptional circumstances presented by this action, specifically those where parallel criminal cases track an SEC complaint arising from the same facts.” SEC v. Citigroup Mkts., Inc., 2014 WL 2486793, at *5. It remains to be seen whether Judge Marrero’s “wait-and-see approach” in these situations will gain traction at the SEC, particularly because it could significantly delay settlements in cases where, like Martoma’s, the criminal conviction is appealed.