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Wells Notice

A "Wells Notice" is a letter sent by a securities regulator to a prospective respondent, notifying him of the substance of charges that the regulator intends to bring against the respondent, and affording the respondent with the opportunity to submit a written statement to the ultimate decision maker.

There is no legal requirement for a regulator to provide a Wells Notice, however it is the practice of the SEC and the NASD to provide such notice.  Procedurally, the SEC and NASD Staff (the people you are dealing with during the investigation) do not have the authority to commence proceedings.  They need to obtain approval to commence proceedings.  The approval process is handled without any input from the prospective defendant.

While there is no rule or regulation that requires that a prospective defendant be given the opportunity to address the decision maker prior to the filing of an action, in 1972, SEC Chairman William J. Casey appointed a committee (chaired by John Wells and commonly referred to as the “Wells Committee”) to review and evaluate the Commission's enforcement policies and practices.  The Wells Notice stemmed from that committee's recommendations.

This Wex entry prepared by Mark J. Astarita, Esq. of Beam & Astarita, LLC and adapted from an article titled "The Wells Notice in SEC and NASD Investigations." 

 

"Lawrence Shaw was the founder, president, chief executive officer, and largest shareholder of Internet Solutions for Business, Inc. (ISFB), a Nevada corporation with its headquarters in Coventry, England."

"In October 2000 the SEC's staff provided Shaw and Shaw's corporate attorney in the United States . . . with a Wells Notice, informing Shaw that the staff intended to recommend that the SEC authorize the filing of a civil action against ISFB and Shaw.  Shaw made a Wells Submission in response, explaining why the Commission should not accept the staff's recommendation."

“A Wells Notice notifies the recipient that the SEC's Enforcement Division is close to recommending to the full Commission an action against the recipient and provides the recipient the opportunity to set forth his version of the law or facts.  The recipient's response, by which it sets forth its version of the law or facts, typically providing documents in support thereof, is termed a Wells Submission."

S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1163 & n.1 (9th Cir. 2007) (quotation marks and citation omitted).