FORTUNE — In the wake of Judge Jed Rakoff’s order rejecting the SEC and Citigroup’s proposed $285 million settlement of charges that it misled investors into purchasing subprime mortgage securities, the SEC has continued to defend itself, and several columnists and news outlets have joined the chorus.

The SEC doesn’t have the resources to force companies to admit wrongdoing or to prosecute the matters in court, these commentators say. Enforcement chief Robert Khuzami claims that the SEC exacts as much in the way of punishment as it believes it can obtain at trial anyway.

But these arguments are missing the point.

In accounting fraud cases, particularly following Enron, the SEC opted to go after individuals and exact settlements from those at the highest levels of the corporate food chain. Realistically, the SEC may have trouble wrangling with Citi (C) as a whole, but what about pursuing high ranking individuals in the firm who contributed to the alleged wrongdoing, rather than just picking on one token employee?

In cases where companies cooked the books, for instance, the SEC has gone after CFOs, exacting a fine and barring that individual as an officer or director for life. The CFO may not have made the false entries and may have been following accounting procedures that were cleared by outside auditors. But if the SEC had any notion that the CFO looked the other way or sent out signals that he was determined to “make the numbers,” he would likely pay the price. Such harsh measures have sent a strong signal to CFOs that they should enforce a zero tolerance policy for financial fudging and monitor the messages they give to staff.

Of course, the court may have to agree to director or officer disbarment — and that is not always easy to achieve. But it is likely that in Citi’s case, if the facts support the SEC’s allegations, Judge Rakoff might be supportive.

Since the SEC has a history of pursuing a different kind of settlement under similar circumstances, the supposed havoc that would be created if the SEC pursued these cases differently is overblown. The issue is not just whether defendants should be allowed to neither admit nor deny allegations in a settlement, although this is important. Nor is the issue a Hobson’s choice:  if the SEC changes its practices, we either end up with the SEC going the weaker road and fining Citi through administrative procedures — or following a more forceful approach by taking the case to trial at great cost to taxpayers.

The ultimate end game is in crafting settlements that deter future wrongdoing by providing both sufficient punishment as well as requirements for correction. Just as CFOs are held accountable for financial statements, Citi’s officers should be held accountable if there were repeated problems with the information provided to clients and practices of selling known toxic assets.

What would an ideal settlement and its aftermath look like?

1. Penalties against individuals at the highest levels responsible for oversight, including fines and, where appropriate, barring their future service as officers and directors of public companies,

2. Remedial actions by the companies, which would be monitored by the SEC (something the SEC does not currently do) and for which failure to comply would result in significant penalties against individuals at the highest levels responsible for oversight, including fines and barring their future service as officers and directors of public companies, and

3. SEC monitoring and enforcing disbarments which, judging from the past, it does not always do.

True, the SEC cannot use Sarbanes-Oxley as support in the Citi case. But the securities laws are strict, the federal sentencing guidelines are clear, and the wounds of the financial crisis are fresh. Matters like the Citi case don’t require creative solutions; they require will.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.