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Alternative Market Briefing

Study finds the SEC is not bringing charges in 20% of cases with a Wells Notice

Thursday, October 17, 2013

Beverly Chandler, Opalesque London:

Law firm Sadis & Goldberg has commented on an independent study by the Wall Street Journal which found that 20% of individuals and entities who received Wells Notices from the U.S. Securities and Exchange Commission ("SEC") from 2010-12 did not end up facing any charges.

The firm writes: "The percentage of those receiving Wells Notices that do not face charges is much higher than many outside experts believed. This study shows that it is worthwhile for anyone receiving a Wells Notice to have counsel provide a robust Wells Response, because there is a good chance of persuading the SEC not to bring charges."

In a Wells Notice, the firm explains, the SEC warns an individual or entity that the SEC's staff has made a preliminary determination to recommend to the Commission that the SEC file charges. A Wells Notice will offer the recipient the opportunity to submit a written or videotaped response to the Notice (called a "Wells Response"), setting forth defenses and any other reasons why the SEC should not bring charges. The purpose of the Wells process is to ensure that the SEC hears a potential defendant's side of the story before bringing charges. Since SEC charges themselves can adversely affect the career of any securities professional - regardless of whether they are later proven wrong - the process is aimed at avoiding unnecessary harm to those who may be innocent......................

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