What is a Wells notice?
Regulators notify people or businesses of the results of completed investigations in which violations have been found via Wells Notice. Typically, it takes the form of a letter informing recipients of the broad scope of the breaches found and the specifics of the enforcement actions that will be brought against them.
Knowing What Wells Notices Mean
William J. Casey, the SEC Chair at the time, established the Wells Committee in 1972 to investigate the SEC’s enforcement policies and regulations. This committee is honored in the name of the Wells notice.
After receiving a Wells Notice, the identified individual or company is notified that the SEC may file a civil lawsuit against them. It can provide information explaining why the suit shouldn’t be filed.
Answering a Wells Notification
Receiving a Wells Notice, receivers may arrange for potential defendants in SEC enforcement actions to address the case’s decision-makers directly on their behalf.
A Wells submission answers a Wells notice provided by a potential defendant. Potential defendants must submit a Wells submission in the form of a legal brief within a set number of days. It must provide factual and legal justifications for the refusal to prosecute the defendants.
Since the contents of a Wells submission are available to the public, most securities law professionals may suggest that it is not necessarily in the best interests of potential defendants to make such a submission. Whatever is alleged in the Wells In addition to being subpoenaed and used against the respondents in any further civil lawsuit initiated against the defendants, the request may be utilized against the defendant in the enforcement procedures.
The Method of “Pre-Wells”
Regulators may sometimes initiate communication with the accused party after their investigation is complete but before sending out a formal Wells notice. This may be called a “pre-Wells” procedure when it happens.
The defense attorneys’ spoken arguments and written filings are often part of this procedure. If a case raises essential policy considerations or unique or highly technical challenges, the SEC could be open to participating in a pre-Wells procedure. In other situations, the SEC is open to permitting a pre-Wells procedure because they think it will make a settlement more likely. Finally, authorities may be ready to go forward on a pre-Wells basis in a specific situation due to mitigating circumstances.
Conclusion
- A Wells communication is an official communication from the SEC alerting a recipient to impending enforcement proceedings against them. A Wells Notice letter is delivered after a possible regulatory or securities law breach is investigated.
- Within thirty days of receiving the Wells Notice, the accused may file a Wells Submission, essentially a legal brief.
