U.S. District Judge Jed Rakoff threw out the agency's settlement with Citigroup over a 2007 derivatives deal, and in the ruling said that companies should not be allowed to settle civil cases by neither admitting nor denying the allegations. Here's a key passage (via the LAT):
In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances.
This is a very big deal because the SEC settles the vast majority of its fraud cases with the defendant not admitting - or denying - that the law was violated. It's even done in Ponzi scheme cases. The agency says that such settlements are arranged so that cases can be expedited, but they're a major hassle for anyone looking to collect damages. As noted by the NYT:
Cases in which no facts are established cannot be used in evidence in other cases, like shareholder lawsuits seeking recovery of losses or damages. The S.E.C.'s policy -- "hallowed by history, but not by reason," Judge Rakoff wrote -- creates substantial potential for abuse, the judge said, because "it asks the court to employ its power and assert its authority when it does not know the facts."
A settlement with Citigroup would have been especially irksome because the bank is a repeat offender, having violated the antifraud provisions of the nation's securities laws many times.