Firms have fighting chance with FINRA

Broker-dealer firms facing litigation from FINRA may have a chance at beating the charges, provided they fight rather than settle, according to a study from Sutherland Asbill & Brennan LLP. When taken to court by FINRA, the 67 polled firms won 22% of their cases outright. It doesn’t sound like much, but even those that lost were able reduce FINRA’s proposed sanctions 55% of the time. “Many firms and registered representatives fear litigating against FINRA because its staff has often spent months or even years investigating the conduct,” said Brian L. Rubin, partner of Washington-based Sutherland Asbill & Brennan, in a statement. “Our study continues to show that it often pays for member firms to litigate, rather than settle. Firms that step up might walk away with a little more money in their pockets—even if they don’t win. About 70% of the time, respondents convinced the panel to order fines that are less than what the staff demands. In turn, the penalties were reduced by 40%. In one case, FINRA staffers pushed for a fine of either $28 million or $98 million. Instead, the hearing panel, comprised of two current or former industry members and one FINRA employee, charged the firm a $5 million fine. Respondents were also able to convince the hearing panel to reduce suspensions 56% of the time. Those who were successful had their suspension periods trimmed by 63%, from an average of 9.2 months to 3.4 months. However, the fight is less promising for respondents who appealed decisions to the Securities and Exchange Commission: They lost 71% of the time.