That detail highlights a pattern in SEC enforcement cases that is drawing criticism from lawyers and lawmakers: Even as the agency has collected $2 billion in penalties from financial firms for wrongdoing related to the 2008 financial crisis, few top executives have been sanctioned, particularly in connection with complex instruments like collateralized-debt obligations.

Stoker was charged with neglect, so why wasn’t his supervisor?

Meantime, ProPublica gets Citigroup on the record saying that the $285 settlement, which is over one CDO, “means that the SEC has completed its CDO investigation(s) of Citi.” And there’s no reason to believe otherwise, as Felix points out over at Reuters. He explains why that’s a big problem:

But if that is going on, it’s a scandal. For one thing, it’s incredibly unfair to everybody who bought one of the dodgy CDOs which is not prosecuted. Investors in Class V Funding III, for instance, are getting all their money back as a result of this latest settlement. But what about investors in Citi’s other synthetic CDOs, like Adams Square Funding II, or Ridgeway Court Funding II, or even Class V Funding IV? Not to mention the $6.5 billion of Magnetar deals, where — according to all ProPublica’s reporting — Magnetar was intimately involved in choosing what went in and what didn’t. The big sin, remember, in both the Goldman and Citi deals, was one of disclosure: the banks didn’t disclose to investors that the short side of the trade was hand-picking the contents of the deal. And you just know that there were dozens of deals — not just one per bank — where that key disclosure was missing.

These SEC settlements have a habit of raising more questions than they answer.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.