Broker-dealers and registered reps shouldn’t always fear litigating against the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) as new research from the law firm Sutherland Asbill & Brennan shows it sometimes pays to “swing for the fences” rather than settle.
Since 2005, Sutherland has conducted a study of litigated disciplinary proceedings brought by FINRA against broker-dealers, registered representatives and associated persons. Newly released data by the law firm analyzes cases from October 2008 through September 2010 where broker-dealers and individuals were charged with violating SEC and FINRA statutes, regulations and rules. That time period coincides with the SEC’s 2009 and 2010 fiscal years.
Of the 237 charges that were litigated by the SEC and FINRA and resulted in SEC initial decisions or FINRA Hearing Panel decisions during FY 2009 and FY 2010 (October 2008 through September 2010), broker-dealers and individuals succeeded in getting approximately 13% of the charges dismissed, Sutherland found.
Those BDs taking on the SEC had a relatively high success rate during the period (approximately 28%), which was greater than in FY 2008 (approximately 19%). Those taking on FINRA succeeded in getting approximately 7.6% of the charges dismissed, although they had slightly greater success during FY 2010 (8.6%) compared with FY 2009 (7%). Both years represent declines from FY 2008 when FINRA respondents succeeded in getting 15% of the charges dismissed, Sutherland found.
The study also revealed that those BDs and registered reps taking on FINRA with counsel are significantly more successful than those without. FINRA respondents represented by counsel succeeded in getting approximately 9.8% of charges dismissed, the study found. FINRA respondents without counsel, on the other hand, went 0-for-39 during the period. Since January 2006, only one pro se FINRA respondent, that is, without counsel, has succeeded in getting any charge dismissed.