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Annual Sutherland Study Shows that Litigating Against the SEC and FINRA Pays for Some Broker-Dealers and Registered Representatives

March 16, 2011

WASHINGTON (March 16, 2011)Sutherland Asbill & Brennan LLP today announced the results of its 2011 Sutherland SEC/FINRA Litigation Study – an annual review of the litigated cases brought by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) against broker-dealers and associated persons.  Through the study, Sutherland Partner Brian L. Rubin and Associate Jae C. Yoon found that in Fiscal Year FY 2009 and FY 2010 (October 2008 through September 2010) it paid to fight SEC and FINRA charges in some trials and appeals, particularly in cases involving fraud. 

“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 Mr. Rubin, who represents firms and individuals being investigated and prosecuted by the SEC, FINRA, and states.  “Our 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."

Highlights from the study include:
• Of the 237 charges that were litigated by the SEC and FINRA and resulted in SEC Administrative Law Judge (ALJ) or FINRA Hearing Panel decisions during FY 2009 and FY 2010, respondents succeeded in getting approximately 13% of the charges dismissed.
• FINRA respondents with counsel are significantly more successful than pro se respondents.
• SEC staff failed to prove fraud charges approximately 57% of the time in FY 2009-2010.
• When SEC and FINRA respondents were found to have been liable for one or more charges, 33% of the time the ALJ or the Hearing Panel imposed monetary sanctions that were lower than the staff sought at the trial.
• When cases were appealed from SEC ALJs to the full Commission, 33% of SEC respondents were successful in getting reduced sanctions.

To review the study in full, click here

Sutherland Asbill & Brennan LLP is a law firm with global reach known for solving challenging business problems and resolving sophisticated legal issues for many of the world’s largest companies. Founded in 1924, the firm handles matters throughout the United States and worldwide. Seven major practice areas—corporate, energy and environmental, financial services, intellectual property, litigation, real estate, and tax—provide the framework for an extensive range of focus areas, allowing Sutherland attorneys to serve a diverse client base that ranges from small and medium-sized start-up businesses to a significant number of Fortune 100 companies.

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