| Read Time: 4 minutes | Brokers & Advisors | Regulatory Defense |

If you’ve received a Wells Notice from the SEC, it’s important to understand what it is and how to respond.

What is a Wells Notice?

what is a Wells notice

A Wells Notice is usually a formal letter (sometimes just a telephone call) in which the staff enforcement attorneys of the U.S. Securities and Exchange Commission (SEC) notify individuals and/or firms that they are planning to recommend that the SEC authorize the attorneys to bring an enforcement action against the individual and/or the firm. 

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A Wells Notice will typically set forth the specific allegations against the individual and/or firm, as well as provide an opportunity for a response before the SEC makes a final decision on whether to bring charges. After an SEC investigation has turned up evidence of potential securities law infractions, the staff enforcement attorneys will usually provide a Wells Notice but, not always!

Note: If you have received a Wells Notice, it means the SEC enforcement attorneys believe you have been violating securities laws and regulations, it is not a finding of guilt. It is important that you act quickly and consult with an experienced securities defense attorney to protect your rights and interests.

What information is contained in a Wells Notice?

A Wells Notice from the SEC will usually contain the following information:

  • Identify the specific charges against the individual or firm that the SEC Enforcement Division is considering;
  • Notify the recipient of the Wells Notice the opportunity to provide a written or videotape voluntary statement defending their actions (which may or may not include arguments why the Commission should not bring an action or why proposed charges or remedies should not be pursued, or bring any relevant facts to the Commission’s attention in connection with its consideration of the matter);
  • Provide a reasonable time period for the recipient to prepare and submit their response;
  • Advise the recipient that any submission should be addressed to the appropriate Assistant Director;
  • Inform the recipient of the Wells notice that their Wells submission may be used by the Commission in any action or enforcement proceeding;
  • An attached copy of the Wells Release; and
  • An attached copy of the SEC’s Form 1662.

The majority of what appears in a written Wells notice is boilerplate.

Typically, the written notice details statutory and regulatory infractions under consideration but does not allude to the specifics of the specific case.

Are public companies required to disclose a Wells Notice?

A Wells notice is a private communication to the recipient, and the Commission will not disclose it.

In the past, many companies elected to not make any public disclosure of a Wells Notice.

However, in recent years, some companies have voluntarily disclosed the receipt of a Wells Notice in their public filings with the SEC.

Generally, such disclosures are a discretionary choice, rather than a requirement. The decision turns on whether the investigation and potential consequences would be a material fact that needs to be disclosed in light of other statements being publicly made by the company.

Are registered broker-dealers and investment advisors required to disclose a Wells Notice?

Yes, if you are a registered broker-dealer or investment advisor, you will be required to disclose the receipt of a Wells Notice in your Form U4.

Related Reads: SEC Subpoenas: How to Respond

How to Respond to a Wells Notice

If you’ve received a Wells Notice, the first thing you should do is consult with an experienced securities defense attorney. Your attorney will help you understand the specific allegations against you and decide whether you should respond at all. If so, the attorney will craft a strategic and customized response on your behalf.

Your response to a Wells Notice (also known as a Wells Submission) will be incredibly important in determining whether or not the SEC takes enforcement action against you. In some cases, a well-crafted response may convince the SEC to drop the matter entirely. In other cases, it may result in a more lenient punishment if the SEC does decide to bring charges.

Before responding to a Wells Notice, you and your attorney will need to carefully review all of the evidence collected during the SEC’s investigation.

This may include:

  • Understanding the specific charges the SEC Enforcement Division is considering filing against you
  • The limitations established for the Wells notice disclosure
  • The deadline for submitting your Wells Notice disclosure to the SEC

Once the analysis of the evidence is complete, your attorney will work with you to prepare a persuasive response that addresses the SEC’s specific concerns.

This is a very important step as a Wells Submission presents the facts and the first arguments to persuade the SEC Enforcement Division to not pursue an enforcement action or to recommend a less severe action.

The SEC will review the response and make a final determination on whether or not to bring charges.

Even though the Wells Notice process is confidential, it may become public if the SEC decides to bring an enforcement action against you. More important, whatever is written in the response to the Wells notice could be deemed an admission of the facts stated within the Wells Notice.

What Happens if the SEC decides to bring Charges?

If the SEC decides to bring charges after you’ve received a Wells Notice, it will file a formal complaint against you in federal court or administrative proceeding. At this point, you will have an opportunity to defend yourself against the SEC’s charges.

This is a complex process, and you will need to have an experienced securities defense attorney by your side to protect your rights and help you navigate the legal system.

A Wells Notice is just the beginning of the SEC’s enforcement process, but it’s a very important step. If you’ve received a Wells Notice, make sure you consult with an experienced SEC defense attorney as soon as possible to ensure the best possible outcome in your case.

Consider Consulting with an Experienced SEC Defense Attorney

If you’ve received a Wells Notice, you should consult with an experienced securities defense attorney as soon as possible.

The Law Firm of Robert Wayne Pearce, P.A., has represented individuals and entities in SEC investigations and enforcement actions for over 40 years.

For dedicated representation by attorneys with substantial experience in all aspects of SEC investigations and enforcement proceedings nationwide, contact our law firm by phone toll-free at 800-732-2889, locally at 561-338-0037, or Contact Us online.

We will help you understand the specific allegations against you and will work with you to prepare a persuasive response to the SEC.

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Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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