When FINRA or the SEC initiates a disciplinary action against a broker-dealer, many firms go ahead and settle the matter without going to hearing. The reasons are many and include wanting to put the matter behind them, going with a known result as opposed to an unknown result, or even a belief that by settling they will not upset the regulators more. While nothing is wrong with settling a case, and indeed many cases should be settled, firms are wise to review the case with counsel and review all of their options. It also may be worthwhile to litigate a case simply to seek to reduce the sanctions that the regulators seek. In some instances, the existence of a violation may be clear, but the sanctions the regulators seek in settlement are too harsh. Firms may then be better served, both as to sanctions and public relations, by putting up a fight and not accepting bad sanctions.
Since he left NASD (n/k/a FINRA) where we both worked for several years, Brian Rubin at Sutherland has published an annual roundup (I believe its annual) on whether it pays to litigate against the regulators. Brian's most recent study covers the period of October 2007 to September 2008, and is a good read. It again shows what defense counsel have long known: there is often a "litigation discount" as to sanctions when firms go to a hearing. Brian's study, co-authored with Christian Cannon, breaks down results of getting charges dismissed, obtaining lower sanctions, and more. Firms, and individual brokers, faced with cases against them by the SEC and FINRA should seriously consider whether it is in their best interest to settle a matter or to litigate, and should consult with experienced counsel to assist in making such a decision.
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