Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Wells Notice

What it is:

A Wells Notice is a letter from a regulator such as the Securities and Exchange Commission that warns a financial institution or financial professional that the SEC is beginning an investigation into the institution's or professional's activities.

How it works (Example):

Specifically, a Wells Notice informs a person or institution that a regulator intends to recommend that the Justice Department or other authority begin enforcement proceedings against the person or institution. A Wells Notice must advise the receiver of the nature of the investigation, though they don't always go into great detail.

The prospective defendant then has a chance to respond, typically in writing, to the entity sending the Wells Notice. This is called a Wells Submission.

Regulators typically provide Wells Notices as a courtesy; they generally aren't required by law.

Why it Matters:

Wells Notices are never good news, because they suggest that a regulator suspects wrongdoing. However, they are usually not surprises. By the time the prospective defendant gets a Wells Notice, a preliminary investigation usually has already occurred.

It is important to note that a Wells Notice does not mean the prospective defendant is already guilty. The investigation will bear out that determination.