Wells notice

A Wells notice is a letter that the U.S. Securities and Exchange Commission (SEC) sends to people or firms when it is planning to bring an enforcement action against them. The notice indicates that the SEC staff has determined it may bring a civil action against a person or firm, and provides the person or firm with the opportunity to provide information as to why the enforcement action should not be brought.

Regulators are not legally required to provide a notice; however, it is the practice of the SEC and the Financial Industry Regulatory Authority (FINRA) to provide such notice.[1]

The name "Wells notice" is derived from the Wells Committee of the SEC which proposed this process in 1972. This SEC committee was named after John A. Wells, its chair. The other members of the committee were former SEC Chairmen Manuel F. Cohen and Ralph Demmler.[2]

Among the recommendations made by the committee was the following:

"Except where the nature of the case precludes, a prospective defendant or respondent should be notified of the substance of the staff’s charges and probable recommendations in advance of the submission of the staff memorandum to the Commission recommending the commencement of an enforcement action and be accorded an opportunity to submit a written statement to the staff to be forwarded to the Commission together with the staff memorandum."

References

  1. ↑ Mark J. Astarita, Esq. (n.d.). "The Wells Notice in SEC and NASD Investigations". seclaw.com (operated by VGIS Communications, LLC). Retrieved October 2, 2012.
  2. ↑ "June 1, 1972 Report of the SEC Advisory Committee on Enforcement Policies and Practices (Wells Committee Report)" (PDF format). Retrieved October 2, 2012.


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