# Wells Notice: What it Means, How it Works

![A securities regulator signing and issuing a notice of a company's infraction.](https://www.investopedia.com/thmb/bIB-1G-1X4AQZtgpXtbTsnrl6D8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/WellsNotice-de8a556badc04731bfc6bea1a7cd6785.jpg)

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## What Is a Wells Notice?

A Wells Notice is a notification issued by regulators to inform individuals or companies of completed investigations where infractions have been discovered. It usually takes the form of a letter, which notifies recipients both of the broad nature of the violations uncovered as well as the nature of the enforcement proceedings to be initiated against the recipient.

### Key Takeaways

*   A Wells Notice is a formal notice from the SEC informing a recipient that the agency is planning to bring enforcement actions against them.﻿﻿
*   A Wells Notice letter is sent at the end of an investigation into potential securities-law or regulatory violations.
*   The accused may respond to the Wells Notice within 30 days via a Wells Submission, taking the form of a legal brief.

## Understanding Wells Notices

The Wells notice is named after the Wells Committee, formed in 1972 by then-SEC Chair William J. Casey in order to review the enforcement practices and policies of the [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC), and chair by John Wells.

The receipt of a Wells Notice means that the SEC may bring a civil action against the person or firm named therein, and gives said person or firm the chance to offer information as to why such an action shouldn’t be brought.

## Responding to a Wells Notice

After receiving a Wells Notice, recipients have a chance for prospective defendants in SEC enforcement proceedings to speak on their own behalves, directly to the decision-makers involved in the case.

A prospective defendant’s response to a Wells Notice is known as a Wells Submission_._ Prospective defendants have a certain number of days to make a Wells Submission, which should take the form of a legal brief, and include both factual and legal arguments to prove why charges should not be brought against the prospective defendants.

A Wells Submission, and its contents, are public information, and as a result, most securities law attorneys may advise that making such a submission is not always to the prospective defendants’ best interests. Anything alleged in the Wells Submission can be used against the defendant in the enforcement proceedings; it can also be subpoenaed and used against the respondents in any other civil litigation brought against the defendants.

## The “Pre-Wells” Process

In some cases, regulators are willing to start a dialog with the accused party at the conclusion of their investigation, but before issuing a formal Wells Notice. When this occurs, it may be referred to as a “pre-Wells” process.

This process will often include written submissions and oral arguments made by the defense counsel. The SEC may be willing to engage in a pre-Wells process if a case involves novel or highly technical issues, or significant policy questions. In other cases, the SEC is willing to allow a pre-Wells process because they believe it will facilitate reaching a settlement. Finally, there may be extenuating circumstances in a particular case that cause regulators to be willing to proceed on a pre-Wells basis.

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[Enforcement Manual](https://www.sec.gov/divisions/enforce/enforcementmanual.pdf)," Pages 19-21. Accessed Mar 23, 2021.
>     
> 2.  U.S. Securities and Exchange Commission. "[Enforcement Manual](https://www.sec.gov/divisions/enforce/enforcementmanual.pdf)." Page 24-25. Accessed Mar. 23, 2021.
>     
> 3.  U.S. Securities and Exchange Commission. "[Report of the Advisory Committee On Enforcement Policies and Practices](http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/papers/1970/1972_0601_SECWells_Part1.pdf)," Page 1. Accessed Mar. 23, 2021.
>     
> 4.  U.S. Securities and Exchange Commission. "[Enforcement Manual](https://www.sec.gov/divisions/enforce/enforcementmanual.pdf)," Page 22. Accessed Mar 23, 2021.
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> 5.  U.S. Securities and Exchange Commission. "[Enforcement Manual](https://www.sec.gov/divisions/enforce/enforcementmanual.pdf)," Page 25. Accessed Mar 23, 2021.