The SEC and Citigroup won a delay in the trial of a lawsuit the agency brought against the bank while an appeals court considers a judge’s refusal to approve their $285 million settlement. “The SEC and Citigroup have made a strong showing of likelihood of success in setting aside the district court’s rejection of their settlement,” the U.S. Court of Appeal in Manhattan wrote yesterday. Rakoff Decision is the Target. In November, after U.S. District Judge Jed Rakoff declined to approve Citigroup's settlement of SEC charges that it misled investors in a $1 billion financial product linked to risky mortgages.  The Judge then ordered them to go to trial, which was scheduled for 7/16/12.  Rakoff criticized the SEC's practice of settling without requiring the Respondent to admit wrongdoing, and added that the proposed pact was "neither fair, nor reasonable, nor adequate, nor in the public interest."  In short, the agreement didn’t provide him with "any proven or admitted facts" to inform his judgment, he said. Reaction of SEC's Khuzami. "We agree to settlements when the terms reflect what we reasonably believe we could obtain if we prevailed at trial, without the risk of delay and uncertainty that comes with litigation," Robert Khuzami, SEC Enforcement Director said in a statement on Thursday.  "This settlement approach preserves resources that we can use to stop other frauds and protect other victims." Appeals Court Actions. In December, the appeals court halted the lower-court proceedings until it made the ruling.  The 3-judge panel issued an initial ruling yesterday, while adding its perception that there's a good likelihood it will overturn Judge Rakoff's rejection of the settlement deal. The 3-judge panel said the case raises questions about responsibilities allocated between the federal government’s executive and judicial branches and the deference a judge must give to an agency’s policy decisions. Rakoff’s complaint that the bank didn’t admit liability "prejudges the fact that Citigroup had in fact misled investors" and assumes the SEC would prove that at a trial, the court wrote. "We know of no precedent that supports the proposition that a settlement will not be found to be fair, adequate, reasonable, or in the public interest unless liability has been conceded or proved," it said. Many factors come into deciding whether to go to trial, including the likelihood of getting a better deal in a settlement and the expense of a trial, the court said. In Support of Judge Rakoff. "We continue to believe Judge Rakoff got it right in rejecting this settlement and are confident that the circuit court, when it hears the case on the merits, will conclude that the SEC and settling parties must present significantly more information to evaluate a proposed settlement," Dennis Kelleher, CEO of Washington-based Better Markets, which seeks to improve financial-market transparency, said in an e-mail. The case is: U.S. Securities and Exchange Commission v. Citigroup Global Markets Inc., 11-05227, U.S. Court of Appeals for the Second Circuit (New York). The district court case is 11-cv-7387, U.S. District Court, Southern District of New York (Manhattan). Click for referenced story:  [CNBC, 3/16/12].