What Is a Wells Notice?
Let me explain what a Wells Notice really is. It's a notification from regulators letting individuals or companies know that an investigation is done and they've found some infractions. This usually comes as a letter, telling you about the general violations they've uncovered and what kind of enforcement actions they're planning to start against you.
Key Takeaways
Here's what you need to grasp right away. A Wells Notice is the SEC's way of formally telling you they're gearing up to bring enforcement actions against you. It arrives at the end of their probe into possible securities-law or regulatory breaches. If you're on the receiving end, you get 30 days to fire back with a Wells Submission, which is basically a legal brief laying out your side.
Understanding Wells Notices
The name comes from the Wells Committee, set up in 1972 by SEC Chair William J. Casey to look over the commission's enforcement practices. John Wells chaired it, hence the name. When you get one of these notices, it signals that the SEC might hit you with a civil action. But it also gives you a shot to explain why they shouldn't proceed against you or your firm.
Responding to a Wells Notice
Once you've got that Wells Notice in hand, you as a prospective defendant in an SEC enforcement case have a direct line to the decision-makers. You can speak up for yourself. Your response is called a Wells Submission. You've got a set number of days to put this together—it's like a legal brief with factual and legal arguments showing why they shouldn't charge you.
Keep in mind, though, that a Wells Submission is public info. That's why many securities lawyers will tell you it's not always the smartest move. Anything you put in there could come back to bite you in the enforcement case or even get subpoenaed for use in other civil suits against you.
The “Pre-Wells” Process
Sometimes, regulators will open a conversation with you right after their investigation wraps up, but before they send the official Wells Notice. We call this the 'pre-Wells' process. It often involves written submissions and oral arguments from your defense team. The SEC might go for this if the case has novel or technical twists, big policy implications, or if it looks like a settlement could happen. Other times, unique circumstances in your situation might prompt them to start this way.
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