The Securities and Exchange Commission’s Division of Enforcement announced several updates to its Enforcement Manual, including giving the subjects of investigations more time at the outset to respond to notices of potential charges.
The SEC said the manual, which was last updated in 2017, will be revised to include changes to investigative procedures to enhance consistency and uniformity in the Division’s practices and to create greater efficiencies to support the commission’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
“The SEC’s modified Enforcement Manual seeks to clarify, and enhance the public’s understanding of, how we enforce the federal securities laws,” said Margaret A. Ryan, Director of the SEC’s Division of Enforcement. “Our updates to the Enforcement Manual ensure greater uniformity, reflect the Division’s best practices, and improve our staff’s ability to carry out the mission-critical work they do on behalf of investors.”
The SEC listed three main updates to the Manual:
-Ensuring a uniform Wells process: A Wells notice is a notification issued by regulators to inform individuals or companies of completed investigations where infractions have been discovered. The SEC said that in order to encourage an open dialogue between SEC staff and potential respondents and defendants, the updates provide that recipients of a Wells notice will ordinarily receive four weeks to make Wells submissions, not the usual two weeks as in the past. The update also gives guidance on what makes a Wells submission most helpful to the staff and the Commission. The updated Enforcement Manual provides that Wells meetings will be scheduled within four weeks of receipt of a Wells submission and will include a member of senior leadership within the Division.
-Facilitating simultaneous consideration of settlement recommendations and waiver requests: The updated Enforcement Manual reflects that the SEC recently restored its prior practice of permitting a settling party to request that the Commission simultaneously consider an offer of settlement and any related request for a Commission waiver from automatic disqualifications and other collateral consequences that result from the underlying enforcement action. By providing potential parties to an SEC action with greater visibility into the collateral effects of a settlement, the commission said the update will conserve its resources, enhance the transparency of its processes, and protect investors by driving significant efficiencies in the resolution of investigations.
-Additional updates to the Enforcement Manual: The updated Manual details the Division’s framework for evaluating cooperation, including the impact of cooperation on civil penalties. It also includes changes intended to encourage more consistent internal collaboration, updates regarding the formal order process, an updated framework for referrals to criminal authorities, and other changes intended to conform the Enforcement Manual to current best practices within the Division.
The SEC emphasized that these updates are part of an ongoing review of the Enforcement Manual.
“This is an important and 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,” said SEC Chairman Paul S. Atkins. “I applaud Judge Ryan’s and the staff’s work on revisions to the manual and their commitment to a continued review of the manual going forward to ensure its procedures remain current, effective, and relevant.”
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