Wells Notice: What It Means and How It Works

Key takeaways

• A Wells Notice is a formal letter from the Securities and Exchange Commission (SEC) indicating the agency may bring enforcement charges following an investigation.
• It summarizes the alleged violations and gives the recipient an opportunity to respond before charges are filed.
• The usual response is a written legal brief called a Wells Submission, typically due within 30 days.
• Wells Submissions become public and can be used by regulators or other litigants; counsel may advise caution about what to disclose.

What is a Wells Notice?

A Wells Notice notifies an individual or firm that an SEC investigation has identified potential securities-law or regulatory violations and that the agency is considering civil enforcement action. It does not itself impose penalties or find wrongdoing; instead, it offers a chance to present factual and legal arguments to the decision-makers overseeing enforcement.

The term comes from the Wells Committee, formed in 1972 to review SEC enforcement practices.

Responding: the Wells Submission

The principal way to respond is a Wells Submission:
* Format: a legal brief containing factual explanations, legal arguments, and any mitigating information supporting why charges should not be brought.
* Timing: recipients are generally given a set period (commonly 30 days) to file a submission.
* Public record and risk: Wells Submissions and their contents can become public and may be subpoenaed or used against the recipient in the enforcement case or in separate civil litigation. Because of that risk, attorneys often weigh carefully whether to file and what to disclose.

The pre-Wells process

In some matters, the SEC may engage the subject of an investigation before issuing a formal Wells Notice. This “pre-Wells” dialogue can include written submissions and oral presentations. The SEC may allow pre-Wells engagement when:
* issues are novel or highly technical,
* a dialogue could facilitate a settlement, or
* there are extenuating circumstances specific to the case.

Practical considerations

• A Wells Notice signals serious regulatory risk but is not a formal charge. It’s an opportunity to influence enforcement decisions before a case is filed.
• Engage experienced securities counsel immediately to evaluate whether to submit a Wells Submission and to craft its content to balance legal defense with disclosure risks.
• Keep in mind that anything communicated—whether in a submission, oral presentation, or informal pre-Wells exchanges—may be used later by regulators or in related litigation.

Sources

• U.S. Securities and Exchange Commission, Enforcement Manual; Report of the Advisory Committee on Enforcement Policies and Practices.