Wells Notices, FINRA AWCs, and SEC Settlements

You can also decide to settle the dispute with FINRA through an Acceptance, Waiver, and Consent form (AWC). You should seek legal counsel to help attempt to negotiate the terms of the settlement, for example, the sanction(s) and fine(s) FINRA wishes to impose on you, the broker. It is important to note that negotiating the terms of the AWC may not eliminate the issue at hand, but can help make the terms of the punishment a little more desirable than what could have originally been imposed. For example, an experienced securities law attorney may be able to negotiate that FINRA does not bar the broker from the financial industry but suspends her for a few months instead.

AWC stands for Acceptance, Waiver, and Consent form. An AWC is a brief document. It provides the background of the facts that led to FINRA initiating the enforcement action against the broker and cites the relevant FINRA rules that it believes the broker violated. How those facts read, in part, can be negotiated with a lawyer’s help. At the end of the AWC, the alleged wrongdoer is asked to sign the document. Typically, FINRA requests the wrongdoer to sign after the consent to sanctions section. Thus, the wrongdoer is consenting to the punishment for the alleged misconduct. Entering into an AWC may seem enticing for brokers because it appears to act as a quick solution to the problem; however, some brokers quickly realize that signing an AWC was not in their best interest.

FINRA presents the AWC to a broker, alleging various claims of misconduct. The broker decides to sign the AWC, hoping that the problem would just “go away.” He does not have time to fight the issue with everything going on in his professional and personal life. He or she signs the document believing the matter is behind them. He or she soon realizes that he or she cannot get another job in the industry because FINRA barred him or her from working in the industry. Turns out, potentially being barred was a sanction imposed on the broker in the AWC.

A Wells Notice is a form that indicates that an SEC employee recommended that action be taken against the individual or company. The notice generally includes the allegations against the company/individual, along with the remedies sought. This notice is specifically given after the SEC has completed its investigation, but prior to any formal legal action.

You are allowed to mediate with the SEC. Mediation is a voluntary and non-binding process that enables parties to attempt to quickly resolves differences through a neutral mediator. In order to begin the mediation process, both parties generally must consent to mediation through a written agreement. The mediator in the matter must remain neutral, meaning they cannot determine issues or make binding decisions. Further, the mediation process is kept private and confidential. Mediation is favorable because it can lead to a settlement that is mutually agreeable and avoids the need for further proceedings. Certainly, a good securities lawyer can negotiate a settlement and settlement language before charges are filed in most cases.

Upon commencement of and engaging in investigations by the SEC, it may decide to settle with the defendant, rather than going to trial. Many SEC cases reach a resolution before trial.