Does The SEC Demand More In Settlement Than It Can Get At Trial?

When the Securities and Exchange Commission (SEC) brings charges, counsel must decide whether it is better to negotiate a settlement or put the SEC to its proof at trial. In view of the costs, delays and uncertainties of trial, a securities practitioner might naturally assume that the SEC is willing to settle for less than it is likely to get after a hearing. This article analyzes SEC administrative proceedings involving scienter-based¹ fraud charges against individual respondents over the most recent three-year period.² Surprisingly, this article finds that in these cases the SEC has, on average, insisted on significantly harsher sanctions in settlement than it obtained after a hearing.³

1. Piper Capital Dramatically Illustrates The Disparity.