SEC Chairman Calls for a Fairer Wells Process: Reinforcing Due Process and Transparency in Enforcement

Securities and Exchange Commission (SEC) Chairman Atkins recently spoke at Fordham Law School for the “25th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities, and Financial Law” as the keynote address. He publicly raised concerns about the Wells process since becoming chair. We sincerely hope that all regulatory bodies will take heed to amend their processes to increase fairness and transparency, and promote robust dialogue, rather than engaging in gamesmanship by keeping confidential material in investigative files.

Chairman Atkins said in part, “That conviction has guided me throughout my career. In 2007, I was happy to say at this lecture series that the Wells process had become a cornerstone of fairness. As many of you know, the Wells process is the mechanism through which the enforcement staff notifies potential respondents or defendants of any charges — and the basis for such charges — that the staff intends to recommend to the Commission. The potential respondents or defendants are then provided an opportunity to make written or video submissions to the Commission setting forth their interests and position on the subject matter of the investigation. 

These ‘Wells submissions’ provide in most cases a last opportunity for potential respondents or defendants to persuade the staff that an enforcement action, either in whole or in part as the staff intends to recommend it, is not warranted. They also provide the Commission with a different, and potentially convincing, view of the facts and law concerning the matter. 

The Wells process should be viewed as an extension of due process and fundamental constitutional rights that play an integral role in protecting citizens from a powerful government agency that could become policeman, prosecutor, judge, jury, and executioner all in one. We have seen the Supreme Court focus on constitutional and due process rights in SEC matters in recent years: Lucia v. SEC and Jarkesy v. SEC, among others. I believe that this focus will continue in the future. 

In my 35 years in and around the SEC, I can definitively say that Wells submissions can and do change the trajectory of enforcement actions — not in every case, of course, but in enough cases to matter. The SEC staff do not always get things right the first time, and the Wells process is a valuable procedural device that helps to guard against plain mistakes, extreme legal theories, misinformation, biases, and conflicts of interest. Tonight, I should like to return to this theme and extend it in consideration of how we can improve on and refine our enforcement processes while preserving their original purpose.”

Chairman Atkins’s call to reinforce fairness and transparency in the Wells process challenges both regulators and market participants to elevate the quality of engagement at a critical juncture in SEC enforcement. For financial firms, the message is practical and immediate: invest in the Wells stage, insist on transparency and present a rigorous, well-documented submission. In a landscape where constitutional scrutiny of enforcement procedures is rising, disciplined advocacy at the Wells phase can be the difference between escalation and resolution.