Originally published by Law360 on October 2, 2026, and republished here with permission.
The U.S. Securities and Exchange Commission’s May 28 opinion in a Financial Industry Regulatory Authority disciplinary proceeding is, on its face, a decision about the scope of FINRA’s power under FINRA Rule 8210.[1] Read closely, it signals how the current commission expects its own enforcement program to operate, holding that FINRA does not lose its ability to compel testimony simply because it has issued a Wells notice.
Notably, however, the SEC expressed concern over FINRA’s use of a post-Wells Rule 8210 request, observing that such requests “should be rare and occur only when FINRA has stated good reason for doing so,” and set aside the sanction FINRA had imposed for the respondent’s refusal to testify.[2] For practitioners, that pairing is key.
Most commentary regarding the decision focuses on the first holding: that FINRA’s investigative authority under Rule 8210 remains broad even after a Wells notice has been issued, and that a respondent cannot refuse to comply simply because they believe the investigation is over. But In the Matter of Jason Lynn DiPaola leaves a separate procedural question unanswered, namely, whether and how that authority should be exercised once FINRA has publicly represented through a Wells notice that an investigation has reached its conclusion.
Although the commission affirmed that DiPaola had violated Rule 8210 by refusing to testify, confirming that FINRA’s investigative authority survived the Wells notice, it refused to let the sanction for that violation stand.[3] The commission found it “troubling that when FINRA finally sought DiPaola’s additional testimony, it did so while simultaneously issuing a Wells Notice,” and concluded that “[s]eeking on-the-record testimony following the delay and the issuance of a Wells Notice thus raises concerns about the fairness of FINRA’s investigative process.”[4]
It is against that backdrop that the commission pointedly added that “FINRA did not adequately justify why it did so here.”[5]
The opinion was issued by the full commission: Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda.[6] As such, DiPaola does more than delimit the scope of Rule 8210; it signals the current commission’s thinking about its role as a regulator.
The response reflects a broader philosophy, articulated at the highest levels of the commission. In a June 30 speech, Atkins promised a “broader, thorough review of enforcement processes — something that has only occurred once before in the SEC’s history.”[7]
Peirce on June 9 cautioned that “[r]easonable restraint in reading our statutes and rules is the best course,” warning that “[i]f we rush up to the edge of every law and regulation, we might tumble over into unauthorized territory.”[8] And on March 19, Uyeda was equally direct, criticizing a prior era in which “the Commission chose enforcement as its primary regulatory tool” and observing that “investor protection does not mean that government ought to engage in paternalistic control.”[9]
Read together, these statements are the clearest public signal of how this commission intends to wield its enforcement authority. While individually modest, they all point unmistakably in one direction.
As DiPaola makes clear, the commission will demand that the self-regulatory organizations it oversees exercise similar restraint. That expectation is rooted in FINRA’s guidance regarding when an investigation ends.
In Regulatory Notice 09-17, under the heading “Sufficiency of Evidence Review,” FINRA explains, “At the conclusion of the investigation, the staff analyzes the evidence and applicable law and makes a preliminary determination of whether or not a violation appears to have occurred.”[10] If the staff concludes that formal discipline is warranted, the matter proceeds to the Wells process, where the respondent is afforded an opportunity to explain why formal charges are not appropriate.
That phrase deserves attention: It marks a procedural line of demarcation, not mere chronology. By the time a Wells notice is issued, enforcement staff has determined that the investigation has concluded, the evidence is sufficient to support a preliminary charging recommendation and the respondent should be afforded an opportunity to explain why charges nevertheless should not be filed.
While this legal and factual analysis evolves throughout the course of the investigation, formal charging determinations are, as a practical matter, possible only once the reasonably available evidence has been gathered.
Viewed through that lens, the SEC’s observations in DiPaola take on additional significance. If FINRA itself has declared the investigation complete, it is hardly surprising that the commission expected post-Wells Rule 8210 requests to be unusual and ordinarily accompanied by an explanation providing good reason for why further testimony had become necessary. The stated good reason bears not only on the appropriateness of sanctions, but also on the procedural significance of the Wells process itself, which moving the goalposts undermines.
Recent developments at both the SEC and FINRA reinforce that understanding. In February, the SEC revised its Enforcement Manual for the first time since 2017.[11]
The manual now directs staff to: (1) inform Wells notice recipients of the “salient, probative evidence” the SEC staff has gathered during the investigation and believes or has reason to believe is unknown to the recipient; and (2) make reasonable efforts to allow Wells notice recipients to review relevant portions of the investigative file that are not privileged or otherwise confidential.[12]
The premise underlying these reforms is straightforward: A Wells submission can only accomplish its intended purpose if the respondent knows the case he or she is answering.
FINRA has moved in the same direction. As part of its FINRA Forward initiative, FINRA now offers member firms an additional meeting near the end of fact-finding, before the Wells process begins, during which its enforcement team shares its findings and the evidence behind them.[13] And on June 30, FINRA published an external review of its enforcement program conducted by professor Paul Eckert of William & Mary Law School and former SEC Commissioner Troy Paredes, which includes recommended changes to the Wells process.[14]
Although the SEC and FINRA arrived at these reforms differently, they reflect the same institutional judgment.[15] That the Eckert/Paredes report nowhere mentions DiPaola, yet ends up at the same place, makes the alignment clear.
That shared premise raises an important question after DiPaola. If the purpose of these reforms is to ensure respondents have a meaningful opportunity to respond to a substantially complete investigative record, what happens when that record changes after the Wells submission?
Without a limiting principle, the Wells process risks becoming something quite different from what FINRA intended. Rather than providing respondents with a meaningful opportunity to persuade the enforcement staff that the completed investigative record does not justify disciplinary charges, a Wells submission could instead become a road map for further investigation.
Respondents identify factual disputes, explain anticipated defenses and expose perceived weaknesses in the case. FINRA may then use its compulsory investigative authority to explore those very issues before deciding whether to file a complaint.
The practical problem this creates for respondents, while unintended, is real. A Wells submission that identifies factual disputes, explains anticipated defenses or challenges the sufficiency of the evidence does exactly what the process invites.
But if FINRA responds with a post-Wells Rule 8210 request, the respondent faces an uncomfortable reality: Compliance is not optional. A failure to appear or produce is, after DiPaola, an independent basis for industry sanctions, and the consequences of noncompliance are career-ending. The respondent cannot simply decline because the investigation was supposed to be over.
The practical options are limited: Counsel can raise the propriety of the request with FINRA supervisory staff or comply while reserving the right to review any newly developed record and respond to it later.
Neither is satisfying: The first depends on FINRA policing itself, and the second assumes FINRA will allow it, which current guidance does not guarantee. The respondent who made a candid Wells submission has, in effect, given enforcement staff a blueprint for further investigation with no procedural check on how that investigation can then be used. This undermines confidence in the process.
If respondents are afforded access to the investigative record before submitting a Wells response because that record is presumed to represent the completed investigation, the process becomes more difficult to justify when the evidentiary record remains subject to compulsory expansion after the respondent has revealed his defenses.
A respondent who receives FINRA’s investigative findings at the pre-Wells meeting and then faces a post-Wells Rule 8210 request may ultimately be responding to a moving target. The record presented before the Wells process begins may not be the record upon which the charging decision is ultimately based.
FINRA’s own outside reviewers reached similar conclusions. The Eckert/Paredes report recommends that enforcement information requests, including post-Wells Rule 8210 requests, be approved by an individual at an appropriate level of seniority, that they not issue “after the Wells stage without a clear investigative purpose,” and that respondents be able to inspect testimony transcripts and exhibits “immediately upon communication of a Wells notice.”[16]
Together, these recommendations reflect this article’s central concern: The current framework does not adequately protect the integrity of the Wells process once compulsory investigation resumes.
However, the Eckert/Paredes report stops short. It does not treat the pre-Wells evidentiary record as fixed, does not secure a respondent’s right to review evidence gathered through post-Wells compulsory process and does not provide for a supplemental Wells response when that process expands the record after a submission has been made.
The report’s only proposal for an outside-facing neutral decision-maker — a challenge before a hearing officer or a newly created FINRA officer — is expressly framed as “an extraordinary process,” which the reviewers suggest could require prior escalation to the head of enforcement and that FINRA may wish to defer until it gains more experience with its other Rule 8210 reforms.[17]
That gap is precisely where updated guidance is needed. FINRA’s reforms signal the right instincts, but instinct is not enough. If DiPaola reflects the current commission’s expectation that compulsory process be exercised with restraint and procedural integrity, FINRA’s published guidance should say so explicitly.
FINRA could clarify, whether through an updated regulatory notice or the enforcement manual it has indicated it intends to publish, that:
- The evidentiary record presented before the Wells process begins is presumed to be the record upon which the charging decision will be based;
- Any post-Wells Rule 8210 request should ordinarily be supported by supervisory approval and a written explanation identifying the newly developed issues that necessitate additional inquiry;
- Respondents should be afforded an opportunity to review any salient, probative evidence obtained through that post-Wells process; and
- Where the evidentiary record has materially changed, respondents should have an opportunity to submit a supplemental Wells response before a charging decision is finalized.
These are illustrative, not exclusive.
None of this suggests that Rule 8210 authority terminates upon issuance of a Wells notice. DiPaola correctly rejects such a categorical rule. Nor should FINRA be foreclosed from conducting additional investigation when new issues genuinely emerge after a Wells submission.
FINRA’s broad authority is essential to its self-regulatory mission. Complex investigations aren’t always linear, and additional inquiry is sometimes warranted after a preliminary charging decision.
But in those rare cases, the SEC’s reasoning suggests that it should ordinarily explain why that additional inquiry has become necessary and how it relates to newly identified issues.
A narrower reading of DiPaola is available and deserves attention: The commission affirmed the violation and vacated a single sanction on one record. But the surrounding developments make that reading less persuasive.
Effective enforcement depends on robust investigative authority, but it also depends on public confidence that the procedures governing investigations and disciplinary proceedings are principled and evenly applied. DiPaola reflects this principle, but it is unlikely to be the final word.
Atkins’ promised review suggests more guidance is coming. For now, the more practical signal for practitioners is this: The current commission appears prepared to practice, and demand, the restraint it preached in DiPaola, and to keep reshaping enforcement procedure toward greater transparency. The signal here is clear, and practitioners who heed it early will be better positioned when that broader review finally arrives.
Alejandro Soto is a founding partner at Fridman Fels & Soto PLLC. He previously served as senior trial attorney in the SEC’s Enforcement Division and as an assistant U.S. attorney and deputy chief at the U.S. Attorney’s Office for the Southern District of Florida.
Eric I. Bustillo is a partner at Fridman Fels. He previously served as director of the SEC’s Miami Regional Office and as an assistant U.S. attorney and chief of the Economic and Environmental Crimes Section at the U.S. Attorney’s Office for the Southern District of Florida.
Fridman Fels summer law clerk Mia Goldberg contributed to this article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Notes
[1] Jason Lynn DiPaola, Exchange Act Release No. 105568, 2026 SEC LEXIS 1498 (May 28, 2026).
[2] Id. at *27.
[3] Id. , at *19 (holding that “[a]s FINRA was still in its investigative phase—before issuing a formal complaint—the issuance of the Wells Notice did not preclude it from continuing to seek DiPaola’s testimony relevant to its ongoing investigation”). The National Adjudicatory Council decision under review is Dep’t of Enforcement v. DiPaola, Complaint No. 2018057274302, 2023 WL 2683685 (NAC Mar. 23, 2023).
[4] Id. at *26-27.
[5] Id. at *27.
[6] Id. at *27 (“By the Commission (Chairman ATKINS and Commissioners PEIRCE and UYEDA).”).
[7] Paul S. Atkins, Chairman, U.S. Sec & Exch. Comm’n, Remarks at the Economic Club of New York (June 30, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-economic-club-new-york-063026.
[8] Hester M. Peirce, Comm’r, U.S. Sec. & Exch. Comm’n, Peirce Out: Remarks at the U.S. Chamber of Commerce Capital Markets Summit (June 9, 2026), https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-chamber-commerce-capital-markets-summit-060926.
[9] Mark T. Uyeda, Comm’r, U.S. Sec. & Exch. Comm’n, Capital, Choice, and the Pursuit of Happiness: Remarks at The SEC Speaks in 2026 (Mar. 19, 2026), https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-sec-speaks-031926.
[10] FINRA Regulatory Notice 09-17, FINRA Provides Guidance on its Enforcement Process (Mar. 18, 2009), https://www.finra.org/rules-guidance/notices/09-17. FINRA’s guidance expressly contemplates that Enforcement may seek additional information after a Wells Notice. This article does not question that authority. Rather, it argues that, consistent with DiPaola, the exercise of that authority after FINRA has declared the investigation concluded should ordinarily be accompanied by an explanation and procedural safeguards sufficient to preserve the significance of the Wells process.
[11] U.S. Securities and Exchange Commission, Enforcement Manual (Feb. 24, 2026), https://www.sec.gov/files/enforcementmanual.pdf.
[12] Id. at 2-23 to 2-25 (§ 2.3, “The Wells Process”) (directing that “staff should inform the recipient of the Wells notice of the salient, probative evidence that the staff has gathered or received, which the staff may have or should have reason to believe may not be known to the recipient,” and that, on a case-by-case basis, “the staff should make reasonable efforts to allow the recipient of the Wells notice to review relevant portions of the investigative file that are not privileged, do not implicate Whistleblower information, do not contain BSA information, and are not subject to other confidentiality restrictions or statutes”).
[13] Bill St. Louis, Enhancing Our Enforcement Program, FINRA News Blog (Mar. 2, 2026), available at https://www.finra.org/media-center/blog/enhancing-our-enforcement-program.
[14] Paul R. Eckert & Troy A. Paredes, Recommendations Based on a Review of the Policies, Procedures, Processes, and Practices of FINRA’s Enforcement Program (June 30, 2026), https://www.finra.org/sites/default/files/2026-06/Recommendatons-Based-on-Review-of-FINRA-Enforcement-Program.pdf (“Eckert/Paredes Report”); see also Robert Cook, Report from External Review of FINRA’s Enforcement Program, FINRA News Blog (June 30, 2026), https://www.finra.org/media-center/blog/report-from-external-review-of-finras-enforcement-program-20260630. FINRA engaged the reviewers in July 2025, and the Report nowhere cites DiPaola; the Report’s specific recommendations on post-Wells Rule 8210 requests nonetheless track closely with the Commission’s reasoning in that opinion.
[15] The Wells process originated with the SEC: it takes its name from a 1972 SEC advisory committee chaired by John A. Wells, and FINRA later adopted the same mechanism.
[16] Eckert/Paredes Report, supra note 14, at 13 (Recommendation 11.b) (recommending that FINRA require approval of Enforcement information requests by “an individual at an appropriate level of seniority”); id. at 14 & n.31 (Recommendation 11.e(v)) (recommending “enhanced precautions” to avoid “issuing requests after the Wells stage without a clear investigative purpose,” and noting that post-Wells requests “should not be used without good cause”); Id. at 11 (Recommendation 7.c) (recommending that transcripts of on-the-record testimony, including exhibits, be “ready and available for review… immediately upon communication of a Wells notice”).
[17] Eckert/Paredes Report, supra note 14, at 14–15 (Recommendation 12) (contemplating a mechanism involving “a neutral decision maker, such as a hearing officer in the Office of Hearing Officers… or a newly-created FINRA officer”; describing it as “an extraordinary process limited to instances involving genuine risk of substantial harm, extraordinary costs, and unjustifiable burdens”; suggesting it “could be permitted only after good faith participation in traditional escalation processes—including escalation up to the Head of Enforcement—have failed”; and observing that FINRA “may wish to gain experience with the efficacy of the other Rule 8210 reforms already implemented and contemplated” before adopting it).
