You’ve probably seen a Wells Notice. This is a letter from a regulator indicating that it plans to recommend that enforcement proceedings against the prospective respondent be instituted. While the Wells Notice is not required by law, it is still a prelude to a lawsuit. Listed below are some of the questions you may have about this letter. Read on to learn more. This letter comes with a presumption that you’ve violated the law.
Wells Notice is a notification from a regulator
The Wells Notice is a letter issued by a regulatory agency informing the person or organization of violations of securities laws or rules. The letter informs the prospective respondent that enforcement proceedings are pending against them, and the person or organization has 30 days to respond. The prospective respondent then submits a Wells Submission, which is essentially a legal brief.
The SEC plans to take civil injunctive action against GE. The SEC’s proposed remedy could include civil penalties or disgorgement. These remedies are meant to protect the public, and an injunction prohibits a company from taking certain actions. For example, GE will be forced to pay disgorgement if it fails to comply with the SEC’s anti-corruption rules.
Wells Notice is not required by law
While it is not mandatory to disclose a pending lawsuit, a company must give a Wells notice if litigation is likely or apparent. In addition, a company must disclose the existence of an investigation if failing to do so would render other disclosures misleading. The SEC has a duty to disclose pending litigation when disclosure would otherwise be ambiguous or misleading. Its duty to provide this notice is triggered when a company has an affirmative duty to do so, and if failing to do so would make other disclosures misleading.
However, there are some cases in which a Wells Submission is appropriate. One example is when a regulator erroneously applies the law and the firm is not guilty of violating the law. In one case, a firm successfully used a Wells Submission to defend itself against the NASD, the predecessor to FINRA. In that case, the firm was alleged to have violated the 5% markup policy and an unwritten Proceeds Rule.
It is not required to disclose
The Wells Notice has long been a source of confusion for companies, but a recent decision by the U.S. District Court for the Southern District of New York has put an end to that confusion. According to securities experts, the Wells Notice is not a “magic bullet” that automatically triggers a disclosure obligation. A company does not have to disclose its Wells notice unless it believes that it is required to do so.
Many companies receive Wells Notices without facing enforcement actions. But disclosure of the notice can have serious consequences, because negative publicity can hurt the stock price. Nonetheless, a recent case in which an SEC Judge ruled that it is not required to disclose a Wells Notice, Richman v. Goldman Sachs Group, Inc., determined that disclosure of the Wells Notice is not required. The judge’s ruling was reached after analyzing Regulation S-K Item 103, FINRA and NASD rules, and general securities fraud principles.
Wells Notice is a prelude to a potential lawsuit
The question of whether a Wells notice is a precursor to a potential lawsuit has a complicated answer. Although many companies receive Wells notices and don’t face enforcement actions, many stock prices decline after the disclosure. Unfortunately, it’s not always as clear cut as that, says Peter Henning, former head of enforcement for the Securities and Exchange Commission and now professor at Wayne State University.
If you are served with a Wells Notice, you should not ignore it. A Wells notice is the first step in a potential lawsuit. The SEC Enforcement Division usually only has the power to bring a lawsuit after an initial investigation. However, they may try to communicate exceptions to the Wells notice decision. It’s wise to seek legal counsel as soon as possible after you receive the Wells notice.
It can be obtained through a Freedom of Information Act request
A FOIA request is one way to obtain records about a government agency. You can file your request online or mail it to the agency. You will receive an email when the records you requested are available for download. Some agencies do not provide all records requested, but you should contact the agency to find out if they have any backlogs. If you have an older document or are unable to find it online, try contacting the Presidential libraries, which often hold more records.
While a Freedom of Information Act request can yield a large amount of information, public authorities do have certain exemptions and restrictions. Certain information may be exempt from public disclosure because it contains personal details. The public authority must choose which law to follow. If your request is denied, the agency should tell you why, and where to find the information. Otherwise, you can try to negotiate a fee for the information you want.
