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Understanding the SEC's Revised Enforcement Manual
Understanding the SEC's enforcement approach is critical for practitioners and regulated entities alike. One of the few public documents describing how the Division of Enforcement conducts its business is the Enforcement Manual, which provides guidance to staff on conducting investigations, engaging with parties, and resolving matters—including the Wells process and cooperation credit.
The Manual was last updated nearly a decade ago. This week, Judge Ryan, the new Enforcement Director, issued a revised version that reflects her previously previewed approach and addresses priorities highlighted by Chair Atkins.
Key Changes:
Formalized Changes to the Wells Process
The revised Manual now requires staff to ordinarily give targets of an investigation four weeks to submit a response to a Wells notice. It also guarantees that a Wells meeting will be scheduled within four weeks of the submission, and that a member of the Division's senior leadership will attend. Additionally, staff must provide targets with "salient, probative evidence" obtained during the investigation.
While many of these were already common practices, formally establishing them clarifies expectations and should make the Wells process an even more valuable tool for targets seeking to avoid charges.
Pairing Consideration of Waivers and Settlements
In a reversal of a previous reversal, the Manual now establishes a process for the Commission to consider an offer of settlement simultaneously with any related request for a waiver of automatic disqualifications or other collateral consequences of an enforcement action. This will be welcome news for parties whose settlement may turn on whether a related waiver can be obtained.
Additional Updates
The revised Manual also provides updated guidance on how cooperation credit can be earned and modernizes the formal order process, among other changes. The Manual is available here.
It remains to be seen how these revisions will impact new and ongoing investigations. The firm's team will continue to monitor developments and their impact on our clients. The full Manual is available on the SEC's website.
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