Question

The Securities and Exchange Commission (SEC) charges the Able Baker Co. (ABC) with violating an administrative rule regarding the sale of securities. ABC did not realize that in its search for capital it became subject to securities regulations. ABC may attempt to settle the case rather than proceed to litigation because:a. a settlement can be more complex than litigation.

b. it does not want to cooperate with the SEC.
c. a settlement will be more costly for the agency.
d. a settlement is less costly than litigation.

Answer 1

d. a settlement is less costly than litigation.

Step-by-step explanation:

Able Baker Co clearly did not consider the SEC securities regulations when it sold shares. Since they are at a disadvantage it will be better for them to settle than go through the litigation.

Settlements are quicker to resolve and less complicated than litigation. Legal fees during a drawn out court case and likelihood of paying judgement sum makes litigation more expensive.

Therefore it is cheaper for ABC to settle.