The Securities and Exchange Commission may send a so-called Wells notice to a company or individual that is the subject of an investigation that is likely to proceed to enforcement action. The notice gives the company or individual an opportunity to respond.
A Wells notice will outline the general nature of the investigation and list the alleged violations under scrutiny. The notice gives the subject of the investigation the opportunity to file a response before the SEC proceeds with enforcment.
Wells notices may follow preliminary or formal investigations, and a company that receives one will not necessarily go on to be punished. But investors should take note, because a Wells notice is never a good thing.
The Wells notice gets its name because the process evolved from recommendations made by an advisory committee chaired by John Wells.
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