What Is a Wells Notice, and What Is the Significance of Receiving One? - Transcript

A Wells Notice is a formal communication from the Securities and Exchange Commission (SEC) indicating that the agency is considering bringing charges against an individual or entity following an investigation. While receiving a Wells Notice can be intimidating, it is also an important opportunity to respond to potential charges and influence the SEC’s decision-making process. At Malecki Law, we guide clients through this critical phase, helping them understand their options and protect their interests.

A Wells Notice is issued as a part of an SEC investigation when the SEC believes there is sufficient evidence to bring an enforcement action. The notice outlines the charges being considered and provides the recipient with an opportunity to respond before any formal legal action is filed. This process allows the recipient to:

1. Present evidence or arguments to refute the SEC’s findings.
2. Advocate for a settlement or alternative resolution to avoid litigation.

The Wells Notice derives its name from the Wells Committee, which established procedures for SEC enforcement actions in the 1970s. While it is not a formal charge, it signals that the SEC has taken a serious step toward pursuing legal action.

Receiving a Wells Notice is a pivotal moment that requires careful consideration, one that is best to be reviewed with an experienced securities attorney. A response to the notice, known as a Wells submission, allows the recipient to:

• Refute Potential Charges: By presenting evidence or legal arguments, the recipient can challenge the SEC’s findings and attempt to dissuade the agency from proceeding.
• Negotiate a Settlement: The Wells process can open the door to settlement discussions, potentially resolving the matter without formal charges.
• Shape the SEC’s Perception: A well-crafted submission can highlight weaknesses in the SEC’s case, such as insufficient evidence or overly stringent standards, influencing the agency’s approach.

The decision to file a Wells submission is not straightforward. While it provides an opportunity to respond to the SEC’s allegations, it also carries risks. Statements made in a Wells submission can be used against the recipient in future proceedings if the SEC decides to move forward with charges.

At Malecki Law, we evaluate each case individually to determine whether a Wells submission is the right strategy. Factors to consider include:

• Strength of Evidence: If the recipient has compelling evidence to refute the charges, a Wells submission may be an effective tool.
• Complexity of Litigation: In cases where litigation would be particularly challenging or resource-intensive for the SEC, a Wells submission can highlight these difficulties to encourage settlement.
• Potential Risks: If the recipient’s statements in the submission could inadvertently harm their defense, it may be wiser to forgo filing.

Our approach is tailored to each client’s unique circumstances, ensuring the best possible outcome among the complexities of an SEC allegation.

Many people assume that receiving a Wells Notice guarantees that charges will be filed, but this is not always the case. The SEC often re-evaluates its position based on the recipient’s response and may decide not to proceed. Additionally, some lawyers discourage filing Wells submissions altogether, citing potential risks. However, this “one-size-fits-all” approach does not account for the nuances of individual cases.

At Malecki Law, we have successfully guided clients through the Wells Notice process, including cases where the SEC ultimately decided not to pursue charges. Our services include:

• Reviewing the SEC’s allegations and evidence.
• Crafting strategic Wells submissions tailored to the specifics of the case.
• Advocating for settlement or alternative resolutions.
• Preparing for potential litigation if charges are filed.

Our experience in securities law ensures that we can navigate the complexities of the Wells process while protecting our clients’ rights and reputations.

If you have received a Wells Notice, time is of the essence. Contact Malecki Law at (212) 943-1233 or reach out online to schedule a consultation. Our team is committed to helping you make informed decisions and achieve the best possible outcome in your case.

Transcript:

Notice from the SEC is an opportunity for someone who has been investigated to learn what the charges are that will be filed against them and to confront those charges and try to convince the SEC not to bring those charges most lawyers will tell you don’t file a Wells notice and that’s because if you do wind up in a litigated proceeding with the SEC and you say something in your wells notice opposition statement that is incorrect they may try to use it against you at the hearing in the matter however I say it’s a case-by-case basis for you to file a Wells notice we have successfully filed wealth notices where the SEC has decided not to pursue our clients I never say one size fits all to clients and I think you should be aware whenever a lawyer is telling you one size fits all you need to look at whether you have definitive evidence to oppose the potential charges or a situation where the litigation will be so messy for the SEC that they don’t want to pursue it the wells notice is really an opportunity for you to do two things one is convince them not to to pursue you or two to convince them to settle with you you can point out how stringent some of the standards are and you’re going to hold the SEC to those standards and that they don’t have the evidence they need Wells notices should proceed on a case-by-case basis.