A study by law firm Sutherland Asbill & Brennan suggests advisors may not want to immediately settle when regulators bring charges.
The study looked at cases brought before internal review bodies of the SEC and FINRA in 2013, as well as cases that were litigated in district courts.
When claims were heard by the internal review boards, 46 percent of advisors, broker-dealers or registered reps were able to get charges dismissed or reduced. Success rates were even higher in federal courts; judges or juries dismissed or reduced charges 60 percent of the time.
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Cases brought against advisors by the SEC or FINRA are settled 90 percent of the time, according to the study. The cost of litigation is obviously a deterrent. So is losing, which invariably would lead to further disclosure of the infractions to the public.
Cases heard internally at the SEC are overseen by a single judge who is an employee of the regulator. FINRA cases are heard by a panel of three regulators who either are or have been employees of the industry watchdog.
Fighting claims against FINRA actually resulted in increased charges and fines 29 percent of the time. At the SEC, advisors were able to get fines reduced in all eight cases brought in 2013. Broker-dealers were only successful in reducing fines in a quarter of the claims heard.
Half of the recommended suspensions were lowered by FINRA, while the SEC didn't hear any cases recommending suspensions to advisors last year.
The Sutherland survey looked at data from April 2012 to September 2013, and was expanded to include SEC actions brought against advisors and their reps.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
