In his 2001 letter to Berkshire Hathaway shareholders Warren Buffett stated, “[Y]ou only find out who is swimming naked when the tide goes out.” In the fall of 2008, the tide went out when Lehman Brothers collapsed and credit markets froze. Left exposed were the shoddy—and sometimes fraudulent—practices of participants in the theretofore esoteric industry of structured finance. Since then, the Securities and Exchange Commission (SEC) has extracted billions of dollars in settlements from the industry. A frequent enforcement tool of the SEC has been the consent judgment, a hybrid settlement that contains injunctive elements.

This Note examines the role of the SEC in relation to Article III courts, specifically in the context of consent judgments. Drawing on the rich history of equitable practice and the doctrine of the separation of powers, this Note argues that SEC v. Citigroup Global Markets was wrongly decided in that it excessively curtails the role of district courts in determining the propriety of equitable relief. The opinion not only contradicts longstanding precedent, but also goes too far in ceding a core function of the judiciary to the SEC. This Note shows that, as a result, the decision serves to undermine fundamental goals of the securities laws.

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