No subject of an SEC investigation wants to be “Wellsed.” A Wells notice from SEC staff signals that an enforcement action is probably coming, and with it, sleepless nights, tough conversations, and a sense that the agency’s spotlight has found you. Yet, unsettling as it is, the Wells Process also opens a narrow but meaningful window—an opportunity for experienced SEC defense counsel to respond, to shape the narrative, and, under the current Commission’s “Open Jacket” policy, to learn more about the evidence before a case is filed.

It wasn’t always this way. Before the Wells Process became official SEC policy, subjects of enforcement actions were often blindsided. Cases appeared without warning, and defendants had no opportunity to tell their side of the story before the charges went public.

The SEC’s Wells Process has both an unusual and little known origin story. Now a cornerstone of due process in enforcement practice, it was the brainchild of a private attorney, not a government official. In 1972, the Commission’s then-Chairman, William J. Casey, who would later serve as CIA Director under President Ronald Reagan, was facing criticism that the agency’s enforcement program operated with too much secrecy and too little fairness. To address those concerns, Casey appointed New York attorney John A. Wells to chair an independent advisory committee tasked with recommending reforms.

The result was the Wells Committee Report, which urged the SEC to give the subjects of its investigations advance notice of potential enforcement recommendations and a fair opportunity to respond before charges were filed. The Commission adopted the recommendation, and the process was later codified as Rule 5(c) of the SEC’s Rules on Informal and Other Procedures.

Today, the Wells Process is the formal mechanism by which the Division of Enforcement notifies individuals or entities that it intends to recommend an enforcement action, affording them an opportunity to make their case before the Commission acts. It has evolved into a key due-process safeguard in administrative and civil enforcement, often marking the first—and sometimes the only—meaningful dialogue between SEC staff and defense counsel. As many who have practiced before the Commission will tell you, the staff’s posture and willingness to negotiate changes drastically once an enforcement action is filed. 

The SEC’s Enforcement Manual frames the process as a discretionary but structured step: staff may issue a Wells notice, outline the contemplated charges, and invite a written or video submission before making a final recommendation. In recent years, discussion surrounding the SEC’s so-called “Open Jacket” policy has renewed focus on this stage, emphasizing that genuine due process requires not only the right to respond but meaningful access to the evidentiary record underlying the staff’s recommendation. (Read more)

Step-by-Step: The Wells Process (Per the Enforcement Manual)

1. The Wells Rule Baseline

Rule 5(c) of the SEC’s Rules on Informal and Other Procedures allows the Division of Enforcement to notify a person that it intends to recommend charges and to invite a written or video submission explaining why enforcement is unwarranted.

2. Approval to Issue (or Bypass) a Wells Notice

Staff must obtain Associate Director or Regional Director approval before issuing a Wells notice—or recommending an action without one. Factors include: whether the investigation is substantially complete; whether immediate enforcement is needed to protect investors; whether disclosure might compromise an asset freeze; and whether a parallel criminal matter could be affected. In other words, if the conduct under investigation is ongoing and egregious enough to justify an emergency enforcement action (or an arrest by criminal authorities), no Wells notice will be forthcoming. 

3. Form and Content of the Wells Notice

• Preferably in writing (oral notices must be promptly confirmed in writing).
• May preview the evidence supporting the contemplated charges.
• Should:
  • Identify the specific violations under consideration.
  • Offer an opportunity to submit a written or video statement addressing why no action should be taken.
  • Set reasonable limits—generally forty pages for written submissions (excluding exhibits) or twelve minutes for video.
  • Direct the recipient to the appropriate Assistant Director.
  • Advise that the submission may be used by the Commission and may be discoverable. This is key, as: (1) the SEC often takes the position that Wells Submissions are admissible as a party admission in subsequent proceedings under Federal Rule of Evidence 801(d)(2); (2) Submissions provide the SEC with a blueprint of the party’s anticipated defense strategy; (3) Submissions can also be shared by the SEC with other regulators, including criminal authorities, and may be discoverable by private litigants; and (4) Once the investigation has been concluded, members of the press and others might be able to obtain copies of the Wells Submission from the SEC through Freedom of Information Act requests.
  • Include links to the Wells Release and Form 1662.

4. Acceptance or Rejection of a Wells Submission

The staff may reject a submission if it (1) exceeds length limits or is untimely; (2) attempts to restrict admissibility or the Commission’s use under Form 1662; or (3) includes a settlement offer, which must instead be provided in a separate document.

It’s not uncommon for counsel to include a footnote stating that the Wells submission is being provided “for the purpose of resolving the matter without litigation,” in hopes of limiting its later disclosure or admissibility. But this approach carries risk: accepted submissions typically accompany the staff’s recommendation to the Commission—rejected ones generally do not. Counsel taking this approach should therefore weigh the tactical benefit of the disclaimer against the practical risk that it may keep their client’s perspective out of the record entirely. 

5. Post-Notice Options (Discretionary)

This stage is where the SEC’s so-called Open Jacket principle—access to the investigative file—comes into play.

• Investigative File Access: Recipients may request access to non-privileged portions of the staff’s file. The Manual specifies that such access is discretionary and evaluated case-by-case, considering factors such as:
  • whether access would aid both parties in assessing the evidence;
  • the recipient’s cooperation (or invocation of the Fifth Amendment);
  • the stage of other witness testimony; and
  • any ongoing parallel investigations.
• Meetings: Counsel may request a post-notice meeting with staff to discuss the proposed recommendation—usually limited to one meeting.
• Settlement Discussions: Staff may engage in settlement talks but may decline continued discussions that would delay the Commission’s consideration.
• Consultation: Questions regarding the process are to be coordinated with the Office of the Chief Counsel (OCC).

Contact Us for SEC Investigation Help

If you receive a Wells notice, an SEC subpoena for documents or testimony, a FINRA 8210 request, a FINRA on-the-record (OTR) interview request, or a similar inquiry from a state regulator, such as Florida’s Office of Financial Regulation (OFR), act immediately. Contact Fridman Fels & Soto, PLLC to speak with an experienced SEC defense attorney. Prompt action is critical to protect your rights.

Alejandro Soto is a former federal prosecutor and senior official with the SEC. He leads Fridman Fels & Soto, PLLC’s SEC Defense Practice Group and is admitted in Florida and Washington, DC.

Wells Process FAQ

Q1 – Is the SEC required to issue a Wells notice?

No. Staff must seek senior-level approval to issue—or to proceed without—one. The decision depends on the readiness of the case, investor-protection concerns, and potential interference with parallel proceedings.

Q2 – What must a Wells notice include?

It should outline the contemplated violations, provide the opportunity for a written or video response, impose length limits, and advise that any submission may be used by the Commission and could be discoverable.

Q3 – How long can my submission be?

Typically, no more than forty pages (excluding exhibits) for written submissions or twelve minutes for video, unless the staff grants an extension.

Q4 – Can I mark my submission “Rule 408 settlement communication”?

No. Any attempt to restrict admissibility or the Commission’s use of a submission may result in rejection.

Q5 – Can I include a settlement offer in my submission?

No. Settlement offers must be separate from a Wells submission.

Q6 – Will my submission reach the Commission?

Yes, but only if accepted by staff. Rejected submissions are generally not forwarded.

Q7 – Can I review the investigative file (“Open Jacket”)?

Possibly. The Manual gives staff discretion to allow access to non-privileged portions of the file on a case-by-case basis, using the factors above. 

Q8 – Can I meet with Enforcement staff?

Yes. Counsel may request one post-notice meeting to discuss the recommendation and arguments raised in the submission.

Q9 – Will staff negotiate settlement during the Wells phase?

They may, but they can decline further discussions if doing so would delay timely Commission action.