Effective Communication with the SEC Staff during Wells Meetings

Steven Piekin, Co-Director of the Division of Enforcement gave a speech in New York City on May 9, 2018 about techniques for a productive and effective communication with the SEC staff during Wells meetings.

What is the Wells process? Wikipedia summarizes the Wells Notice as “a letter that the U.S. Securities and Exchange Commission (SEC) sends to people or firms when it is planning to bring an enforcement action against them. It is issued at the conclusion of an SEC Investigation notifying the people or firm in question that the SEC has concluded that they should be charged with violation of the securities laws. The notice indicates that the SEC staff has determined it may bring a civil action against a person or firm, and provides the person or firm with the opportunity to provide information as to why the enforcement action should not be brought. The person or firm is generally given 30 days to file this response in the form of a legal brief considering legal and factual arguments as to why no charges should be brought against them. Although investigation is conducted on a confidential basis, this notice, as well as its response, is public information that can be used in later public hearings among other things.”

In his speech, Piekin summarizes the Wells process as follows: “A Wells notice is an invitation for defense counsel to respond to the Enforcement staff’s preliminary conclusions and try to persuade us we are mistaken. We are focused on getting it right, not bringing cases for the sake of bringing cases, so if we are on the wrong track, we want to know that before we proceed further.”

A Wells Meeting is a scheduled meeting with the SEC to discuss the responses to the Wells Notice.

Piekin’s main points are as follows:

Pick your battles.  “In my experience, the most effective advocates pick their battles and focus on the central issues and arguments,” Peikin added. “This may mean foregoing discussion of every argument made in a written Wells submission.”

If the SEC is not going to resolve a certain issue, move on.  Create an active dialogue. Piekin said, “Simply marching through prepared talking points is seldom the best approach.”

Try not to bring any surprises or “gotcha” moments.  “In my experience, the parties are unlikely to make much progress during a Wells meeting if staff are surprised with new facts at the beginning of the discussion, especially if defense counsel takes the position that those facts are central to the case,” Peikin said.

Bringing an ‘advice-of-counsel’ defense can be a loser because: (1) if you don’t bring the attorney/client privileged information it’s a waste of time; and (2) bringing the attorney/client privileged information waives the privilege.

Use arguments from case law and prior SEC actions. When asking staff to make a recommendation to the Commission, “it can be very helpful to show us how and why that recommendation compares with what happened in prior cases,” Peikin said. “This is particularly true when you are asking the staff to recommend that the Commission bring certain charges and not others, or only seek or impose certain types of relief. In these circumstances, pointing to what has been done before can be helpful.”

“Likewise, if an analogous case has been litigated and resulted in a decision that is at odds with what the Staff has proposed, point us to those precedents as well,” he added. “Showing us that we are proposing something that is inconsistent with what we would likely obtain if we were to prevail in litigation can be powerful as well.”

Don’t threaten the SEC (no duh). “Defense counsel can safely assume that if a case has gotten to the Wells stage, we are serious about the case and we have come to the preliminary conclusion that we can prevail if the case is litigated. Simply telling us that the client will litigate achieves nothing.”

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