SEC enforcement shake-up and Wells process reforms: Top points

Under the current administration, the United States Securities and Exchange Commission (SEC) has advanced significant organizational and procedural changes in its Division of Enforcement, which will impact how investigations are supervised and how defense counsel approach the Wells process.

Notable changes include the replacement of Regional Directors with Deputy Directors and Chairman Paul S. Atkins’ refinements to the Wells process, emphasizing due process, transparency, and realistic timelines.

Together, these changes point to a more centralized enforcement process and a Wells practice that offers greater visibility into the staff’s evidence and theories, with practical implications for strategy, timing, disclosures, and settlement dynamics.

We explore the key changes below.

Key changes

The SEC has reorganized its Division of Enforcement leadership so that local enforcement heads in offices such as Boston, Fort Worth, and Atlanta, and the specialized units now report directly to Deputy Enforcement Directors. This replaces the traditional Regional Director layer and consolidates oversight across broader regions. This structural shift channels more significant enforcement decisions through headquarters and is expected to create greater consistency across offices.

While these structural changes take hold, Chairman Atkins implemented several Wells reforms affecting respondents.

Key changes include:

• A baseline of at least four weeks for respondents to submit a response to a Wells notice
  
  
• An expectation that staff will share meaningful portions of the investigative file with respondents and be more forthcoming about contemplated charges and key evidence
  
  
• Formal encouragement of pre-Wells “white paper” submissions as an early, lower-cost avenue to sharpen factual and legal issues
  
  
• Confirmation that SEC Commissioners will receive Wells submissions and white papers, reinforcing that these materials can influence outcomes

Relatedly, Chairman Atkins has aligned the settlement and collateral waiver processes by directing simultaneous Commission consideration of settlement offers and requests to waive collateral consequences of the resolution (e.g., loss of well-known seasoned issuer status and disqualifications under Regulations A and D). This change is intended to reduce uncertainty for respondents and avoid fragmentation in final resolutions.

Why it matters

A more centralized supervisory structure in the Division of Enforcement may reduce the historical variations among regional offices and yield earlier and clearer readouts on the theories, evidence, and remedies that the SEC may pursue in litigation. In turn, this may affect how defense counsel stage advocacy, such as when to escalate discussions, when to invest in a full Wells submission, and how to frame proposed resolutions against Division-wide priorities.

Procedurally, the Wells refinements give companies and individuals increased time and access to the record, which has implications for presenting defenses and narrowing issues. Chairman Atkins emphasized that sharing transcripts and key documents serves due process and accuracy, and he reaffirmed that Wells submissions do change outcomes in a meaningful number of cases. Respondents and counsel may see this as a signal to treat Wells and pre-Wells engagement as consequential, rather than procedural formalities.

The explicit endorsement of pre-Wells white papers is particularly notable for issuers and public companies that are sensitive to disclosure triggers associated with formal Wells notices. White papers may surface legal or factual errors early, preserve resources, and – under the revised framework – reach SEC Commissioners, potentially avoiding a Wells notice altogether or reshaping charging theories.

Finally, the move to deliberate settlement and waiver recommendations simultaneously may shorten the path to certainty on collateral consequences and help respondents evaluate the true cost of resolution, which was previously hindered by piecemeal deliberation.

Takeaways

Companies, financial institutions, and individuals facing SEC scrutiny are encouraged to reassess engagement strategies to reflect centralized supervision and the enhanced Wells framework.

Businesses and individuals may consider:

1. Planning earlier, proactive outreach to staff and, where appropriate, senior enforcement leadership to test and refine the staff’s working theories and ensure that critical exculpatory context is surfaced before positions harden
   
   
2. Leveraging transcript disclosures and other key documents from the staff in white papers and Wells submissions, which now have a four-week baseline
   
   
3. Assessing the disclosure implications of a formal Wells notice and using white papers to address issues earlier, where market communications are a concern
   
   
4. Preparing collateral waiver requests in parallel with settlement discussions so that the SEC may deliberate both simultaneously and provide earlier clarity

For more information, please contact the authors.