As SEC defense attorneys, we can attest firsthand to the dismay our clients experience when we inform them that we have received a “Wells Notice” from the SEC’s Enforcement Division. The Wells notice, which is the civil equivalent of a criminal grand jury target letter, informs recipients that the department is prepared to recommend that the commissioners prosecute them. The putative defendants then learn that they have only two weeks to file a written defense or “Wales Memorandum,” which the commissioners may or may not read, and that the price of filing is to force the defendant to agree that the same submission may be used against them in any subsequent proceedings. There is hardly a level playing field – yet.
On October 7, 2025, SEC Chairman Paul Atkins He gave a speech In the 25th Annual AA Sommer Jr Lecture on Corporations, Securities, and Financial Law. Chief Atkins praised the key role of Operation Wells and how it should be viewed as an extension of due process and fundamental constitutional rights that play an essential role in protecting citizens from a powerful government agency that can become “policeman, prosecutor, judge, jury and executioner all in one.” In contrast to years of one-sided dynamic, Chairman Atkins promised more open sharing of facts gained in the investigation, allowed potential corporate and individual defendants meetings with senior SEC staff to discuss any potential action, doubled the time allowed to file a written brief, and encouraged the early use of white papers to resolve factual disputes — among other reforms.
Wells process
As Chief Atkins explained, the Wells process is the mechanism by which enforcement staff notifies respondents or potential defendants of any charges, and the basis for charges, that the Department intends to recommend to the Committee. The defendants or potential defendants are then given the opportunity to submit a report to the committee, referred to as a Wells submission, stating their position on the subject of the investigation. As the Chair noted, the Wells reports also provide the Committee with a different and perhaps compelling view of the facts and law relating to this issue.
SEC staff don’t always get things right the first time, and as the Chairman described, the Wells process is a valuable procedural tool that helps protect against errors, extreme legal theories, misinformation, biases, and conflicts of interest. Chairman Atkins expressed his desire for the SEC to “get it right,” and that the SEC’s goal is to get to the bottom of the matter to hold people accountable and not play a “gotcha” game.
Open files — more time
With this goal in mind, Chief Atkins expects that enforcement officers, when filing Wells Notice, will provide sufficient information to defendants or potential defendants to understand potential charges and the evidentiary basis for those charges, such as transcripts of testimony and key documents. Chair Atkins also addressed the timeliness of submission of applications and noted that the task force must be realistic about the timelines for submitting applications. He stressed that from now on, staff will provide respondents or potential defendants with at least four weeks to file their Welsh applications.
Meetings with employees
Additionally, Chairman Atkins noted that, upon timely request, senior executive leadership will meet with defense counsel before making a recommendation to the committee. Chief Atkins also referred to the “white paper” process as another way to address concerns about factual or legal issues in an investigation, particularly in cases where a defendant or potential defendant feels obligated to make public disclosure of a Wells Notice or save on the costs of filing a Wells Submission.
Focus on misdeeds and harm to investors – not technical violations
Chairman Atkins noted that the SEC’s enforcement program is an exercise of government power that must be mitigated through fair process, good judgment, integrity, and probity. Going forward, the SEC is expected to pursue cases of actual harm and bad acts and will view cases of benign or innocent acts differently.
Avoid further harm to shareholders
Chairman Atkins noted that processes must ensure that the SEC seeks to impose sanctions and other measures appropriately tailored to the misconduct in question, within the constraints of the law, and without adding further harm to shareholders.
conclusion
As any experienced executive or consultant knows, even rumors that a company or senior official has received a Wells notice are enough to cause the stock price to plummet – so it is critical that the defense do everything it can to convince staff and the committee that the action is not justified before the matter becomes public. With the changes made by Chief Atkins, it is important for defense counsel to consider the following:
- Consult with staff openly about the facts and consider the “white paper” early in the investigation to help reach a common understanding of key facts and seek closure on matters that represent, at best, marginal technical violations.
- Request a review of the investigation file to better educate your defense.
- Request a meeting with senior staff before issuing a Wales notice.
- Request adequate time — at least 4 weeks — to prepare your Wells submission.
In his remarks, Chairman Atkins continued to point to a shift from certain practices of the previous administration and a focus on the Enforcement Division enforcing the federal securities laws fairly and transparently. The President has just provided key new tools for defense to be stronger, more effective advocates—and now is the time to use them.
The opinions expressed in Fortune.com reviews are solely those of their authors and do not necessarily reflect the opinions or beliefs luck.
The post ‘Judge, Jury and Executioner’: How the SEC is finally leveling the playing field on its dreaded ‘Wells Notice’ enforcement process first appeared on Investorempires.com.
