The Securities and Exchange Commission (SEC) monitors activity within the financial markets to protect investors and enforces federal statutes regarding securities. If an investigation reveals evidence of a likely criminal offense, the SEC may send a Wells Notice to financial professionals and business owners advising them of the possibility of future legal action.
Receiving a letter from a federal regulatory agency is nerve-wracking, especially for those who work in the financial sector. Those who respond appropriately can potentially take greater control of a stressful situation.
What is a Wells Notice?
The Wells Notice is essentially a warning about a likely upcoming lawsuit. The SEC sends a Wells Notice as a letter of intent to advise those potentially engaged in securities fraud and similar financial misconduct of impending legal action. Responding appropriately to that notice can have a profound impact on the future of the party subject to the investigation.
What should happen next?
The person served with the notice has the right to respond, typically within four weeks. They may send a Wells Submission, which is a legal brief including information about why the SEC should not take legal action. The Wells Submission becomes public information, and it can serve as evidence in the legal proceedings that may follow.
Anyone who is subject to a federal investigation likely requires the guidance of a white-collar criminal defense attorney, if not a lawyer who specializes in securities-related criminal matters. Small mistakes can potentially strengthen the government’s case.
In cases involving a misrepresentation of circumstances or the provision of inaccurate information, the party interacting with federal investigators could be at risk of secondary charges related to lying to the investigators. A white-collar criminal attorney can help assess the Wells Notice and can assist with the creation of the Wells Submission, if they determine that it is likely to be beneficial.
Rather than ignoring a Wells Notice and hoping that the evidence clears their name, professionals who receive warning letters from the SEC generally need to take immediate action to protect themselves. Retaining the services of a securities law attorney familiar with complex federal white-collar cases can help financial professionals and business owners protect themselves from potentially devastating federal investigations and legal action.