It paid to fight charges brought by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, particularly in cases involving fraud.

That's the conclusion of a study of cases brought by the SEC and FINRA over the course of 2009 and 2010 by Sutherland Asbill & Brennan, a global law firm with a practice in financial services.

“While firms and individuals often think that settling with the SEC and FINRA makes the most sense, our studies continue to show that in some circumstances, respondents will be better off if they try their cases and tell their stories in front of judges or hearing panels, especially where fraud is charged,” said Sutherland partner Brian L. Rubin, who represents firms and individuals being investigated and prosecuted by the SEC, FINRA. 

The study "also shows that there may not be a ‘settlement discount,’ so that respondents, even if they are unsuccessful on the merits, may get reduced sanctions if they litigate rather than settle,” Rubin said.

Sutherland's 2011 study found:

  • SEC staff failed to prove fraud charges approximately 57% of the time in FY 2009-2010.
  • 33% of SEC respondents were successful in getting reduced sanctions, when cases were appealed from SEC ALJs to the full Commission.
  • 33% of the time the ALJ or the Hearing Panel imposed monetary sanctions that were lower than FINRA or SEC staff sought at the trial.
  • 13 percent of respondents got charges dismissed, in the 237 charges litigated by the SEC and FINRA which resulted in SEC Administrative Law Judge (ALJ) or FINRA Hearing Panel decisions
  • FINRA respondents with counsel are significantly more successful than pro se respondents.


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