Wells Notices: The SEC's First Step to Enforcement
What is a Wells Notice?
A Wells Notice is a letter sent by the Securities and Exchange Commission (SEC) to a person or company under investigation for potential violations of securities laws.
The purpose of a Wells Notice is to provide the recipient with an opportunity to respond to the SEC's allegations before the SEC decides whether to bring an enforcement action.
What to do if you receive a Wells Notice
If you receive a Wells Notice, you should take the following steps:
- Seek legal counsel immediately.
- Review the allegations carefully.
- Prepare a written response to the SEC that addresses each allegation.
- Submit your response to the SEC by the deadline specified in the Wells Notice.
What happens after you submit your response
After you submit your response, the SEC will review your response and decide whether to bring an enforcement action.
If the SEC decides to bring an enforcement action, it will file a complaint in federal court.
Why You Might Receive a Wells Notice
The SEC may issue a Wells Notice for a variety of reasons, including:
- Suspected fraud or other violations of securities laws
- Failure to disclose material information to investors
- Insider trading
- Manipulation of the stock market
What to do if the SEC files a complaint against you
If the SEC files a complaint against you, you should take the following steps:
- Contact your attorney immediately.
- Review the complaint carefully.
- Prepare a defense to the allegations.
- Attend all court hearings.
What are the penalties for violating securities laws?
The penalties for violating securities laws can be severe, including:
- Fines
- Imprisonment
- Disgorgement of profits
- Injunctions
