SEC Enforcement Gets a Refresh: Updates to Enforcement Manual Focus on Transparency and Fairness

For the first time in nearly a decade, the Securities and Exchange Commission (SEC) updated its Enforcement Manual (Manual), which has long served as the SEC Division of Enforcement's (Division) primary guide for conducting enforcement activities. SEC Chairman Paul S. Atkins described these updates as a “long-overdue step that builds on the Division of Enforcement’s commitment to transparency, fairness, and process, while ensuring it remains able to fulfill its mission[.]”[1] The most practically significant updates include changes to how the Division initiates enforcement actions –– including a more streamlined Wells process –– as well as clearer cooperation considerations, more efficient settlement procedures, and enhanced criminal referral procedures. The SEC also announced that the Manual will undergo yearly reviews going forward.  

While the Manual has always been comprehensive, its application has not always been consistent across the Division’s different units and from one enforcement action to the next. Judge Margaret A. Ryan, the Division’s Director, explained that the updates are aimed at enhancing efficiency and “ensur[ing] greater uniformity” across the Division’s enforcement activity, and to “underscore the importance of open, informed dialogue.”[2]

Notably, this follows the Commodity Futures Trading Commission’s release of amendments to its Rules of Practice and Rules Relating to Investigations focused on improving transparency and fairness,[3] and of an advisory detailing factors under which the Division will evaluate self-reporting, cooperation, and remediation when recommending enforcement actions.[4] These parallel efforts reflect both agencies’ recent focus on uniformity and transparency in their policies and procedures governing their respective investigative processes.

Wells Process Modifications[5]

The Manual includes substantial revisions to the Wells process aimed at enhancing transparency and procedural consistency. 

First, Division Staff must obtain approval from both the Associate Director or Unit Chief and the Office of the Director before issuing a Wells notice, the letter Staff typically sends the targets of investigations informing them of potential charges and providing them an opportunity to respond. Previously, Division Staff only needed to seek approval from one of those individuals. 

Second, the Manual requires Staff to be more transparent and forthcoming throughout the Wells process, including by informing recipients of “salient, probative evidence” that may not be known to the recipient, being “forthcoming about the content of the investigative file,” and taking “reasonable efforts” to allow recipients to review non-privileged portions of those files. Previously, disclosure was left exclusively to the discretion of the specific enforcement Staff.

Third, the Manual provides market participants guidance as to what makes Wells response submissions effective in the eyes of the Staff, emphasizing that accuracy, a focus on disputed issues, an acknowledgment of adverse evidence, and reliance on supporting documentation are helpful. The Manual also formalizes and extends the standardized response time to four weeks. Previously, timing requirements varied across offices and Staff, and Wells responses were often demanded within two weeks.

Finally, the Manual now provides that a post-Wells meeting be held within four weeks of a respondent’s submission, and that any such meeting must include a member of senior leadership within the Division, along with the Staff involved in the case. 

Action Memo Requirements[6]

The Manual requires that when Staff seek to initiate an enforcement action, they must now submit a more detailed “Action Memo” setting forth “a comprehensive and objective explanation of the recommendation's factual and legal foundations and objectively address significant evidentiary issues, litigation risks, and the primary arguments in any Wells submissions and White Papers that were accepted.” (Emphasis to reflect updated language). Memos must now also detail “whether Wells notices were provided, an explanation for any Wells notices that were not provided, and an explanation for any Wells submissions or White Papers that were rejected,” providing investigative targets the opportunity to present their views on the matter to SEC leadership before the Commission commences an enforcement action.

Enhanced Cooperation Framework[7]

The SEC also added a new formal “Cooperation Committee” that oversees the Division’s cooperation program and seeks to ensure consistent decision-making. Staff must now seek approval from the Cooperation Committee for all cooperation agreements, deferred prosecution agreements, non-prosecution agreements, and immunity requests. In addition, non-prosecution agreements may now be entered only in “exceptional circumstances,” a higher bar than the prior manual's “limited and appropriate circumstances” standard.

The Manual further clarifies that self-reporting credit is appropriate only when a company reports misconduct before the Staff learns of it from other sources and prior to imminent threat of disclosure or government investigation. Credit “will rarely be appropriate” for conduct that is already receiving media attention or is under investigation by another regulator. 

The Manual also provides specific examples of “exemplary cooperation,” such as summarizing internal investigation findings, identifying key documents and witnesses, and facilitating voluntary witness interviews. It also emphasizes timeliness, noting that early assistance “will often more meaningfully advance an investigation.” 

Simultaneous Settlement and Waiver Consideration[8]

Updates to the Manual also include the recent restoration of the SEC’s prior practice of permitting settling entities to request simultaneous consideration of settlement offers and related waiver requests from automatic disqualifications or other collateral consequences. If the SEC accepts a settlement but rejects the waiver, the Manual now requires Staff to notify the prospective defendant or respondent and request a decision about proceeding with the settlement.

Enhanced Criminal Referral Procedures[9]

The Manual incorporates guidance from Executive Order 14294 and a June 2025 SEC policy statement on DOJ referrals, enumerating specific factors for Staff to consider when determining whether to refer a case to the DOJ for potential criminal enforcement. These six factors include: (1) harm or risk of harm; (2) potential gain to the putative defendant; (3) whether the defendant held specialized knowledge or licensure; (4) knowledge that the conduct was harmful or illegal; (5) recidivism or pattern of misconduct; and (6) whether DOJ involvement will provide additional investor protection.

Extension of Statutes of Limitations for Certain Conduct[10]

The updated Manual reflects Section 6501 of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, which expanded the SEC’s disgorgement powers, and extended the limitations periods for securities law violations that require establishing scienter or have equitable remedies," such as injunctions and bars, suspensions, or cease and desist orders. This extended ten-year period for scienter-based violations represents an expansion of the SEC's enforcement reach compared to the five-year limitations period that would otherwise generally apply.

Other Notable Updates

• Ranking and Prioritization.[11] The Manual requires that SEC Associate Directors and Unit Chiefs designate their “Top 5” priority matters and update the list quarterly. It sets forth specific criteria to use to compile the list, including (among others) potential for widespread and extensive investor harm; opportunity to send a message of deterrence; egregiousness of misconduct; whether the alleged wrongdoing clearly violates newly enacted legislation or rules; and whether the matter involves products, markets, or transactions identified by the Division as priority areas.
• Engagement with Harmed Investors.[12] The Manual adds “Engagement” to the Division's mission statement, defined as “engaging with harmed investors and other members of the public in a professional manner.”  This core value is also reflected in new procedural requirements, including engagement with potentially harmed investors during quarterly reviews. Although it has always been an important driver of SEC enforcement decisions, this added section could reflect a reinvigorated focus on investor harm in determining which enforcement initiatives to pursue.
• Document Production Guidelines.[13] The Manual sets forth new guidelines for the format of electronic document productions and establishes that “all requested or subpoenaed documents should be produced directly to the Division's Centralized Processing Unit.”
• White Papers and Other Materials.[14] The Manual provides further guidance regarding the submission of substantive materials other than Wells responses, specifically White Papers. Included in this guidance is a list of reasons Staff may reject a White Paper, including if it exceeds 40 pages or if the person producing the White Paper seeks to limit its admissibility as a settlement communication.
• Blue Sheets and Consolidated Audit Trail (CAT) Data.[15] The Manual adds new sections on the use of Blue Sheets and CAT data, noting that querying this data may be useful “in a variety of investigations” but “typically in matters involving possible insider trading or market manipulation violations.” It directs Staff to consult with dedicated Blue Sheet and CAT groups within the SEC, potentially reflecting a focus on ensuring that groups operate cross-functionally in the pursuit of enforcement initiatives.
• Expanded Ethics and Professional Responsibility Guidance.[16] The Manual includes revisions to its “Ethics” section, with added emphasis on adherence to the Rules of Professional Responsibility and the professional conduct that governs all attorneys. This Update recommends Division Staff review applicable rules of professional conduct in each jurisdiction they operate, and an explicit reference to the “rule regarding candor in tribunals[.]”
• Termination Notices.[17] The Manual indicates that enforcement Staff are “encouraged to send a termination letter to any party who made significant productions in an investigation to enable that party to determine that the matter has been closed.” This expands the universe of individuals and entities likely to receive termination letters; previously, the Manual directed staff to send such letters only to parties identified in the caption of a formal order, who were solicited to submit a Wells submission, or who asked for such notice.
• Off-Channel Communications.[18] The Manual is updated to include off-channel communication methods in the definition of “document” when the Staff sends a subpoena, document request, or document preservation letter. These include WhatsApp, iMessage, and Signal, and specifically includes “messages sent or received on personal devices.”

Impact on the Industry, Next Steps

As Judge Ryan put it, the new revisions to the Manual seek to “clarify, and enhance the public’s understanding of, how we enforce the federal securities laws,” and “ensure greater uniformity, reflect the Division’s best practices, and improve [SEC] staff’s ability to carry out the mission-critical work they do on behalf of investors.” 

These updates, which are already in effect, are a welcome change to many in the industry, and should generally benefit enforcement respondents (and their attorneys) by enhancing transparency, efficiency, and fairness throughout the enforcement process. Still, it remains to be seen how the Staff will interpret and implement these revised procedures. Moreover, while an annual review of the Enforcement Manual could foster adaptability to changing market realities, it could also decrease predictability in enforcement, particularly as administrations (and their enforcement priorities) change.    

For more information on the revisions to the SEC Enforcement Manual, please contact one of the authors of this article or your primary Katten attorney.