The debate, then, is whether these settlements are strong and meaningful. If Citi’s apparent recidivism is any indicator—the SEC has accused Citi of fraud five times since 2003, settling in each instance—they are not, and the lack of meaningful financial penalty limits their deterrent factor. But if the SEC enters more prosecutions without a bump in resources, Khuzami could be proven right—rather than handing out many slaps on the wrist, the agency could end up gaining neither accountability nor penalties to bilked investors.

Writing about the Rakoff decision in The New Republic.

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