FINRA Litigators Got Tougher After The Credit Crash, But The SEC Loses More Cases

Monday, September 26, 2011 07:29
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FINRA Litigators Got Tougher After The Credit Crash, But The SEC Loses More Cases

Lawmakers are complaining about how the SEC has a weaker enforcement track record than FINRA. New numbers will only give them more ammunition.

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The attorneys at Sutherland Asbill & Brennan crunched the numbers and determined that back in 2008, 19% of all SEC cases that went to appeal ended up overturned, compared to 15% of the cases argued by FINRA lawyers.

 

By 2010, the proportion of FINRA cases going against the regulator fell to 8.6%, but reversals against the SEC actually climbed to a full 28%.

 

Obviously, the lawyers are careful to note that defendants with legal representation did a lot better than those who represented themselves.

 

They're framing their findings as a rallying cry to every firm that has been accused of wrongdoing to game the odds and "litigate, rather than settle."

 

That's more than a little cynical. If you play in the industry and do something wrong, you need to be chastised for it.

 

What's more interesting about this trend is how an SEC-unfriendly Congress might use the numbers to pull responsibility -- and funding -- away from the SEC.

 

The House Financial Services Committee is already rumbling about how the SEC can take a decade or so between RIA exams and fails to win a lot of the arbitration cases it brings. 

 

All they see is two regulators: one that takes its time to generate weaker results, and one that's tightening up.

 

News like this may be friendly to lawyers and FINRA, but not to foes of an RIA self-regulatory organization.

 

 

 

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