SEC Chair Announces ‘Wells Process’ Reforms, Expanding Disclosure and Response Rights
Paul Atkins, chairman of the U.S. Securities and Exchange Commission, recently announced changes to the Commission’s “Wells process,” a procedural step used to notify potential defendants of impending enforcement charges. The announcement marks one of the most significant procedural reforms to SEC enforcement practices in recent decades.
In remarks delivered at the 25th Annual A.A. Sommer, Jr. Lecture at Fordham School of Law, Chairman Atkins stated the modifications are intended to reaffirm that the Wells process represents “an extension of due process and fundamental constitutional rights,” with the overarching goal of promoting accuracy, transparency, and fairness in enforcement decision-making.
By way of background, during an SEC enforcement division investigation, enforcement division staff issue a Wells notice to potential respondents to identify the charges – and the basis for such charges – that the staff intends to recommend to the SEC. Potential respondents are then afforded an opportunity to make written or video submissions to the Commission, setting forth their position on the threatened charges. Often a meeting with staff follows the Wells submission.
The Wells process changes, effective immediately, modify three core areas of this process:
Mandatory Disclosure of Evidence
Previously, SEC staff held broad discretion over which documents to share with a potential respondent. Going forward, staff will now be expected to provide sufficient information for the respondent to fully understand the proposed charges and their evidentiary support. Chairman Atkins stressed that staff “must be forthcoming about material in the investigative file,” including key documents and testimony transcripts. Certain categories of information, such as whistleblower-identifying materials and content related to parallel criminal investigations, will remain confidential consistent with statutory limits.
Extended Response Time
Recognizing the complexity of enforcement matters, the standard time for potential respondents to prepare their formal written submission – the Wells submission – will be doubled from two weeks to a minimum of four weeks. The new rules also allow for longer timelines based on the complexity of a given case, addressing prior criticisms that short deadlines created a punitive “gotcha” dynamics for respondents.
Expanded Information for Commissioners
The full SEC, which votes on whether to approve settlements or file charges, will now receive a significantly expanded information packet. Commissioners will receive every Wells submission, even in cases where the staff ultimately changes or drops the charges originally outlined in the notice. Furthermore, any early, voluntary submissions by potential respondents on factual and legal issues, such as white papers, will now also be provided to the commissioners. This change ensures the commissioners benefit from the respondent’s perspective throughout the decision-making process.
In his speech, Chairman Atkins acknowledged that the Supreme Court’s recent focus on constitutional rights in SEC cases, including Lucia v. SEC and SEC v. Jarkesy, necessitated these improvements. Atkins described the reforms as necessary to ensure the Wells process upholds core constitutional protections against overly aggressive enforcement practices.
For fund managers, broker-dealers, and RIAs, the reforms may provide greater opportunity to contest or contextualize allegations before enforcement recommendations reach the Commission – potentially reshaping how regulated entities engage with the SEC during investigations.
In other SEC-related news, Chairman Atkins said the agency may shortly convene a public roundtable to gather input on the Trump administration’s August directive, which calls on the SEC and U.S. Department of Labor to revise guidance and facilitate inclusion of private equity, real estate, and digital assets in 401(k) plans.
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