At a recent corporate counsel meeting, the SEC’s New York Regional Director made a highly critical statment of the Dodd-Frank provision requiring the SEC either to bring a case or to inform the Enforcement Director that no case shall be filed within 180 days of a Wells Notice.
As many are aware, the Dodd-Frank Act required that the SEC make a decision within 180 days once a Wells Notice is issued. A Wells Notice is when the SEC Staff provides a potential person involved in an investigation with notice that it intends to recommend or is considering recommending to the Commission that some action or proceeding should be filed against that person. The New York Regional Director seems to suggest that there is simply not enough time for the SEC Staff to decide if such an action should be brought. He further opines that this limitation is detrimental to the SEC’s enforcement program since it may be the case the SEC has not completed its factual investigation.
Apparently, the New York Regional Director simply forgot the “clock” is within the SEC Staff’s control. That is, if the investigation is not complete, the SEC Staff should not issue a Wells Notice. Further, one wonders the reason for issuing a Wells Notice prior to the SEC Staff completing its investigation, one would think the SEC Staff would wait!!
Clearly, as far back as the inception of the Wells process, it has always been contemplated that, before the SEC Staff issued a Wells Notice to a potential defendant or respondent, the SEC Staff was ready to proceed with the matter. It is troubling that the New York Regional Director claims that there should be more investigation after a Wells Notice is issued. Such an approach leaves much to be desired.
In sum, the Dodd-Frank Act provision seems reasonable in light of accepted practice, and should be considered as a method for ensuring actions proceed expeditiously.