If The SEC And FINRA Investigate You, You May Want To Consider Fighting Back

Wednesday, August 01, 2012 07:14
If The SEC And FINRA Investigate You, You May Want To Consider Fighting Back

Tags: Advisor businesses | FINRA | regulation | sec

IF FINRA or the SEC starts investigating your firm or activities, it might just pay off to sue them instead of doing a settlement. A recent study by Sutherland, Asbill and Brennan analyzed cases from October 2010 to March 2012 where broker dealers and individual reps had been charged with regulatory infractions. 

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Out of 126 charges investigated, 12.7% of defendants had been able to get the charges dismissed. Only seven of those actually pursued litigation against the SEC and all were unsuccessful.
But those filing suit against FINRA were able to get 14.3% of the charges dismissed. This is almost double the success rate of 7.6% in 2009 and 2010.
Survey respondents who had hired counsel to represent them were far more successful in the effort. There were five categories of FINRA charges in 2011 that had yielded the highest fines from FINRA’s disciplinary efforts. They included advertising, auction rate securities, suitability and improper U4, U5, and Rule 3070 filings.
In cases where multiple charges were made, 31.3% were able to get a lower monetary penalty than was desired by regulatory staff. Those challenging multiple charges in 2009 and 2010 had similar success. Respondents who had been investigated by FINRA had much greater success in countering the charges than those who were regulatory targets of the SEC.


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