SEC Overhauls Enforcement Manual: What Investigated Entities Need To Know

On February 24, 2026, the U.S. Securities and Exchange Commission ("SEC") announced significant updates to its Enforcement Manual ("Manual"), marking the first comprehensive overhaul of the Division of Enforcement's ("Division's") internal operating guidance since 2017. While the Enforcement Manual itself does not have the force of law, the recent changes will be significant to companies and individuals that either may become the subject of SEC investigations or that are attempting to resolve SEC investigations. On the front end, the changes allow a potential defendant more time for pre-charge advocacy with the SEC staff and a greater opportunity to engage with SEC senior leadership before the agency decides whether to file charges. For companies and individuals attempting to settle an action with SEC, perhaps the most significant change is that the revised Manual restores simultaneous consideration of settlement recommendations and related requests for waivers of disqualifications that would otherwise result from a violation of the securities laws.

Below we provide more detail on how the revised Manual impacts the different stages of an SEC investigation. However, a note of caution is warranted. Whether these policy improvements actually result in practical benefits to those under SEC investigation will depend on whether these changes are implemented effectively across SEC Enforcement staff.

Wells Process. The "Wells process" has been in place at the SEC for decades and occurs when the SEC staff notifies a firm or individual of potential charges and provides them an opportunity to submit a written response (a "Wells Submission") before the Commission decides whether to file an enforcement action. Previously, the typical deadline for the submission was two weeks after the potential defendant received notice from the staff (although this was often extended in practice). Under the revised Manual, recipients of a Wells notice now generally have four weeks to make a "Wells submission." Further, the updated Enforcement Manual provides that a meeting between the investigative subject's counsel and the SEC staff will occur within four weeks of the Wells submission and that a senior member of the Enforcement Division, at the level of Associate Director or above, will be present at the meeting. This too represents a potential change from prior practice, where, at least during the Biden Administration, a common refrain among securities enforcement practitioners was that it was difficult to get engagement with senior leadership. The revised Enforcement Manual also notes that the most helpful Wells submissions are those that (among other things) focus on disputed factual or legal issues; acknowledge and address evidence and precedent in support of the staff's position, while highlighting exculpatory evidence and adverse precedent; address litigation risks or policy or programmatic concerns that would arise if the staff recommend the charges or sought the relief identified in the Wells notice; or provide documents or citations to the investigative record or legal precedent to support key factual or legal arguments. Finally, the revised Manual notes that an expert report may be helpful in the Wells submission if the charges are "particularly complex or technical."

Settlement Recommendations and Waiver Requests. A violation of the securities laws can result in significant collateral consequences, such as, for example, an issuer being automatically disqualified from the ability to make exempt offerings under Rule 506 of Regulation D. However, as a practical matter, companies often try to negotiate waivers from these disqualifications and other collateral consequences as part of a settlement negotiation with the staff. Under the revised Manual, the Division now formally considers settlement proposals and waiver requests simultaneously, rather than sequentially, which provides greater clarity and reduces uncertainty about timing and outcomes. This coordinated approach allows respondents to address both resolution and collateral regulatory consequences at the same time, potentially streamlining negotiations and informing decisions about remediation, cooperation, and overall settlement strategy. By clarifying the process, the Manual emphasizes greater procedural structure in investigations and potential resolution, providing entities with clearer expectations regarding the timing and coordination of settlement discussions and related waiver considerations.

Formal Orders of Investigation. Under federal law, the Commission must approve a formal order of investigation before the staff can issue subpoenas for documents and testimony (prior to this, the staff is limited to making voluntary requests). The revised Manual provides greater clarity on the Formal Order process and the factors staff should consider when seeking one. Staff seeking to issue a formal order must submit a succinct memo to the Office of the Director for approval. They are directed to consider whether witnesses or documents will need to be subpoenaed to support the investigation, highlighting that the need for prompt production of relevant information not otherwise available will be a key component of Formal Orders going forward. This clarity provides entities with more predictability about when and how formal investigation will be initiated and the types of evidence staff are likely to seek.

Continued SEC Enforcement Policy Changes

The 2026 Enforcement Manual update is the latest in a series of recent announcements addressing revised SEC Enforcement policies and priorities under new Enforcement Division Director Margaret Ryan. For example, in her speech on February 11, 2026, Ryan highlighted the importance of the Wells process in facilitating a transparent and fair enforcement process, the need for reasonable and timely resolutions and the efficient use of Division resources, and the prioritization of investigations of fraud and other misconduct that harms retail investors or undermines market integrity.

The 2026 SEC Enforcement Manual formalizes the new vision and priorities of the current SEC leadership and is intended to provide companies and individuals with a clearer, more structured path through the enforcement process. As a practical matter, understanding these changes is critical for planning submissions, engaging effectively with staff, and making strategic decisions about cooperation with the Division and potential settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.